When it comes to purchasing new software, many businesses make the mistake of buying whatever's low cost and easy to teach. But Matthew de Ganon, a founder of $6.5-million K2 Design Inc., in New York City, knew better than to base his choice on price alone. Before buying a new accounting package for his E-communications agency, he systematically studied the needs of his own employees and then set to work with them, evaluating software packages and vendor credentials.

K2's old accounting software couldn't track revenues or cost-of-sale numbers from partially completed jobs, nor did it let freelance workers enter time sheets remotely. De Ganon set up an evaluating team consisting of everyone who would potentially be affected by a change in software: consultants who submitted their hours from the road and executives who analyzed more detailed financial reports, as well as IT staff and de Ganon himself.

The team began screening software vendors, using site visits and demonstrations to learn what distinguished one product from another. "Everyone's going to tell you their package is flexible and has all you need," says de Ganon, who learned among other things that only some packages allowed hours to be entered in categories such as nonbillable or hold hours. K2's team grilled vendors on postpurchase issues, such as technical support and add-on costs. Of prime concern to the team was vendor stability.

K2 also vetted vendors based on their implementation schedules -- how long would K2 employees be stuck entering data on both the old and the new systems? "You have to determine whether the time lag is in proportion with the advantage the new system will give you," says the founder. In K2's case, the advantage was big. Besides providing clearer and more flexible financial reporting, the new software helped K2 deal with a recruiting crisis by allowing it to pinpoint which positions would add most to the bottom line. "We need that level of understanding to make hiring decisions," says de Ganon. "With our old accounting package, we just wouldn't know."