The cost of a CRM subscription is not the only component of CRM expense. In fact, depending on the size of an organization and/or the complexity of requirements, there can be at least six different levels of CRM expenses.
Below is a chart and an associated table of CRM related expenses over a three year period for a hypothetical company with 50 CRM users. The chart and table are embedded from this spreadsheet. Feel free to save this as a Microsoft Excel spreadsheet or to make a copy in Google Sheets. From there, you can plug in your own user count and assumed per user costs.
Explanations of each of the six expense items are below the table.
The 3 Year CRM Expense Pie
3 Year CRM Expense Table
|1. Structured CRM Buying Process||$17,500|
|2. Core CRM Subscription||$180,000|
|3. Add-on Product Subscription||$36,000|
|4. Implementation (One Time)||$50,000|
|5. CRM Administrator Salary||$120,000|
|6. Post Implementation Modifications||$45,000|
1. A Structured CRM Buying Process
The CRM buying process is the smallest slice of the expense pie. Often it’s smaller a slice than it should be. If too little time and/or money is spent on this component — and if the right type of effort is not expended on this slice — the much larger slices of the pie will result in less long term value.
The assumption used for this cost is loosely based on what we charge our clients for CRM strategy and selection services. Unlike the other assumptions, our charges are not based on number of users. Rather, they’re based on variables such as number of interviewees, the number of systems and the number of CRM functional areas to be addressed.
2. Core CRM Subscription Expense
The core CRM subscription is the most predictable expense. CRM vendors either publish pricing on their website or provide pricing in a conversation. Negotiation skills can come into play with some, but not all vendors. “Everything’s negotiable”, but only when you can communicate with a human.
We chose an arbitrary expense of $100 per user per month.
3. Add-on Product Subscription Expense
It’s not unusual for some or all CRM users to also use an add-on product or products. There are thousands of CRM add-ons ranging from quoting tools, to sales intelligence services to email integration apps.
Our assumption is an average expense of $20 per user per month.
4. The Initial CRM Implementation
A major CRM expense can be the cost for the initial implementation. Some companies assign an IT person to the task. Some companies outsource the implementation to a CRM consulting firm.
In a post on the cost of CRM professional services, we provided an example of a multi line item implementation estimate.
In the spreadsheet, we assumed $1,000 per user as the one-time implementation fee. This is to cover data migration, which can be the most expensive component of a CRM implementation.
It’s worth noting that an investment in #1, a structured buying process, can reduce the cost of implementation — as prioritized requirements will have already been identified and documented.
5. Ongoing Administration
Most organizations need at least a part-time CRM administrator. At minimum, someone needs to manage users in the system, provide training and keep an eye on data integrity.
It’s not unusual for a company with over 50 CRM users to require a full time administrator. However, we assumed a part time role.
According to Salary.com, the median salary in the U.S. for a CRM administrator is over $83,000.
We used $40,000 per year as the expense associated with a 50% FTE CRM administrator.
6. Post Implementation Modifications
While a trained administrator can handle point and click tasks, many companies will work with a third party for developer-level tasks such as complex data migration, data integration and implementing complex business logic.
There can be post-implementation projects that require a developer skill set.
CRM can represent a significant investment for many companies. As such, it’s important to not scrimp on the up front legwork, which is a small slice of the overall CRM expense pie.