Are you following these 4 steps to select software for your small business?

Every small business owner faces this problem at more than one point in their life.  You know you need new software but you aren’t sure how to make the decision.  Often we think we know what we want OR a trusted person has recommended something to you.  You have to live with some software choices for years so you need to do your best to get it right.

The 4 step process.

So to help you figure out what software you select I have outlined my easy 4 step process.

The 4 steps are actually some of the most common questions:

  1. Why -Why do you need the software.
  2. What – What do you need the software to do.
  3. Who – Who can you get it from and what’s it called?
  4. How – How much will it cost.

Once you have answered these questions the right selection should be easy! I say easy because it’s straight forward. Keep in mind that this process can take some time to complete from 1 to 4.  It is quite in depth and takes you through a full analysis of options, including features, benefits and costs.

I have created a spreadsheet that you can use to follow along with the process. Which can be downloaded at the end.


The business problem

What problem are you trying to solve with this software? Before you get started make sure this is in line with your IT Strategy.  If it isn’t then stop wasting time here.  If you don’t have an IT Strategy then you should also consider working that out before selecting any software!

How about a quick visualisation exercise…

“Imagine that you are strolling down a walking track in a brightly lit forest…”

I’m just kidding – it’s not that sort of visualisation.  What I really want you to visualise is the outcome of having implemented this particular software.  What is the problem you are overcoming and what is the end goal here?  Go and  write it down.  The whole selection process can be time consuming so having this  to remind you of the prize waiting at the end should help to keep you focused.

The financial Why

It’s the financial benefits that you need to work out now.  This part is critical in determining the monetary impact the project should have on your business.  Numbers don’t lie so the more accurate you can be about the financial impact the software will have on your business the better!

I like to list the impacts in 3 areas:

  1. Income impact – are you expecting increased sales?  Better profit margins?  Estimate the actual $ value here.
  2. Time impact – is the outcome a reduction in time it takes you to do a job?  How many hours? Is that per week or month?  To convert this to a dollar value you also need to determine what an hour of your time is worth.  If you charge on an hourly basis then use this rate.
  3. Avoided costs – decommissioning old software?  Is there a saving here?  Are you avoiding some other expense by implementing this solution?  Add it to your list!

It’s important to ensure that you also indicate over what period of time the change will occur. Is it 100 dollars per month?  A one off benefit of $500?

I like to calculate 2 values from this data monthly and total over the life of the software.

Expected Service Life

Note to do these calculations you need to know how long you expect the software to be in service.

Small businesses have the benefit of agility over larger businesses.  This agility allows them to pivot and change core business when they identify new ways of doing business.  This means that the expected service life in a small business will probably be much shorter than the big guys.  Where some corporations will use 5 years or more for core software I recommend smaller businesses to use 2 or 3 years maximum.  If you’re not sure then use 2 years as your expected service life.  If you get longer then your estimates then that’s just gravy!


What do you need the system to do.  In the old corporate world I used to live in this was captured in a requirements document – 100’s of pages explaining in great detail everything the system needed to do.  Yes, that is a lot of work, but admittedly these projects often had million dollar budgets!

My solution for a small business is to do a quick list of requirements at a high level.  I like to put these into 2 categories.  The “must have” and the “nice to have”.

Must Have Functionality

Go back to your visualisation and walk through it again.  If the end goal can’t be achieved without some functionality then it’s a “must have”.    Now write it down! Don’t get too specific here unless it’s critical to your end goal.  I like to try and limit the must haves to 5 unless you  are making an extremely complex software choice. In which case write down the absolute bare minimum of your requirements to meet the end goal.

An example from my CRM selection must haves:

“The system must allow me to track all interaction I’ve made with a contact and add additional notes.  Phone, Email, Text, Instant Message, etc.”

These are the main criteria you should be evaluating all of your options against.

Nice to Have Functionality

These are the things that would be nice if the system could do them but they won’t adversely impact the expected outcome documented in your Why if they aren’t there.  I like to keep these to a minimum but if there’s specific things that I want but won’t make or break the selection then I put them in this list.

I get it, you’re busy and this will take some time.  However, the more time you spend getting this right the better chance you will have of making the right decision and enjoying years of trouble free IT.


So next up is asking “Who’s, Who in the Software Zoo” that will meet your must have requirements?  How do you go about finding and line up the suspects?

For common software you probably already know what the top 3 or 4 options are. For example most people could name some of the most popular word processing applications that are available. On the other hand you’d probably be hard pressed to name just one invoice scanning solution.

  1. The first thing to do is a google search. Try different keyword search variations if you aren’t having any luck.
  2. Capterra is a great resource for finding software options in many categories. The include reviews and other great information.
  3. Forums, Facebook groups and other discussion boards. There are many great forums and groups available for small businesses. You can post a question in there to see if anyone can recommend a solution. Remember to be fairly specific and even consider including your 5 must haves so that people can tell you if those requirements can be met or not.

Now create a list of all options that you have found. You should be able to tell pretty quickly whether an option is worth pursuing or not.  If so add it to your shortlist.

I suggest that you choose at most 4 options to add to your shortlist.  These finalists will now go through a more rigorous selection process!


So now we get to the part that you probably thought that we’d start with!  Evaluating each of the finalists in your short list against your “must have” features.   I like to rate mine out of 10 with the following scale as a guide:

  • 0  – Does not even come close to meeting the requirement
  • 5 – Does the bare minimum to pass
  • 10 – Goes above and beyond all expectations

After evaluating the “must haves” you probably have a clear winner.  If so move on to the other evaluation area.  If not this is where the “nice to haves” come into play.  If you have a couple of options that are pretty close then evaluate the rest of your requirements using the same scale.

Other Areas of evaluation

I bet you thought we were done, didn’t you?  Well there’s a couple of items that all software should be evaluated for and they usually don’t appear in most people’s “must haves”.


How well does this software play with others?  Even if you don’t know what an API is you should be asking the question of the vendor how you can integrate their solution with your other systems. For example if you are looking for a CRM – how do you get a newly created contact to be copied over and created in your to your Accounting system or Email Service Provider, etc.  Also consider the other way around. If you create a new contact in your Accounting system how do you create it in your CRM.

Data Accessibility

If you change your mind later down the road how easily can you get your data out so that you can move it to another system? Is the data in a common format that you can use to migrate to another system? Note that this is different from the Integration.  Integration is focused on day to day changes of data in near real time.  Data Accessibility is about ensuring you still have access to your data.


How secure is the system.  Now I’m not a security expert so even I can have trouble answering this one myself.  However if you do a google search with the software name and security then you might get lucky and find more information from 3rd parties that will help you evaluate this.

I appreciate that many of you might not be able to do this part of the evaluation yourself.  I’m more than happy to help out – leave a comment below I’ll do my best to assist!

How (much)?

OK, so now we are on the home straight. The last thing to ask is How – that is “How Much?”.  I like to make a list here of the costs involved including:

  • Actual cost of the software – is it one off or a monthly subscription
  • Implementation costs – do you need to pay someone to help set it up?
  • Your time costs – how much of your time will be tied up in this?  Calculate the $ value using your hourly rate covered in the section “Why”

As in the Why section I also like to calculate these out into “monthly” and “life of project” values for comparison.

Now you should be able to compare the cost against the benefit and get a very rough idea of your payback  period.  To do this take your total cost and divide by the monthly savings.  Round up to the nearest whole number and this is the number of months it will take for you to pay back the total cost of the project.  After this it’s all gravy!

Also note that if your options are close then it may be worth factoring in the payback period into your overall decision making.

If your number of months for payback exceed the expected service life then stop right now – it doesn’t make any financial sense to proceed no matter how much you want the shiny new thing!  You really should be looking at other alternatives.


By following the 4 steps straight forward steps you too can make software evaluations like a pro!  You just need to figure out:

  1. Why -Why do you need the software.
  2. What – What do you need the software to do.
  3. Who – Who can you get it from and what’s it called?
  4. How – How much will it cost.

OK.  I’ll admit it.  It probably isn’t as straight forward to some of you.  I’ve been doing this sort of thing for years so it’s 2nd nature to me.

Free Software Evaluation Spreadsheet Template

So what I’ve done is put together a monster of a spreadsheet that you can use to follow along with my process.  I even do the calculations for you.  All you have to do is the hard work of filling in the tables on each tab and I’ll do the rest!  I have created a version in Excel and for those of you that don’t have MS Office I have a version in Libre Office Calc format!

All I ask is that you sign up to my newsletter to be notified when I post more awesome content.  Grab your copy now!

6 thoughts on “Are you following these 4 steps to select software for your small business?”

  1. love this article Matt! great way to look at the various aspects when purchasing software. Alot of the software these days are SaaS and a subscription basis so it all adds up 🙂

    1. Thanks Aimee.

      I was talking to someone the other day about this exact same problem. SaaS offerings looked at on their own seem affordable enough but they are usually very focused on just one aspect of your business. When you add up all of the different aspects of your business and the SaaS offerings you can end up with a bill of $100’s per month.

  2. A Ramsay Vanderdrift

    A very comprehensive read, put in easy-to-understand “how to” list that will assist business owners to incorporate as a part of their business plan / strategy.

  3. Matt,
    I agree to your point around IT strategy.
    From a larger organisation perspective, I think it’s a must to align software requirements to IT strategy.

    Generally speaking, the hard work would have been done from benefits perspective when a strategy is already defined.

    This in turn should answer your ‘why’. It should also position you to propose tangiable benefits to wider group or stakeholders.

    Then one could look at other aspects as you have suggested.

    I like it!

  4. Hayley D'Ath

    This is fantastic Matt! The best part here has got to be the Spreadsheet template. It is very comprehensive and makes the whole process that much easier! Well done!

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