Five Tips to Obtaining Incredibly Accurate Opportunity Forecasts in Salesforce®
Opportunities in your Salesforce CRM system are documented sales activities in progress, to indicate and forecast potential future sales. But there can often be very different interpretations by different people, as to what the future sale amount may or may not represent.
The ‘out-of-the-box’ Salesforce opportunity module contains an ‘Amount’ field to indicate the value of the anticipated sale as well as the likely closing date. The combination of closing date and amount is used to generate reporting on how much total business can be expected at some future date.
In our work with Salesforce clients we have done many modifications to the opportunity module to provide better reporting and capture additional data points relating to the potential sale.
Tip #1- Create a Variety of ‘Opportunity Amount’ Fields
What Does Amount Really Mean?
CRM systems and opportunity forecasting originated in the enterprise software selling world of the 1980s to track the progress of large-sum, long-cycle transactions. At the final close date, the total amount of the entire sale represented the ‘amount’.
But today, sellers may be more likely to be offering a monthly service that costs $1,995 per month rather than a lump-sum sale. Should the opportunity amount be $1,995? Or should it be $1,995 times 12 months (annualized value $23,940)? ….Or even a longer interpretation such as a ‘lifetime value’ ($1,995 x the length of months an average customer sticks with the product); this would be $119,700 if a customer continues for five years?
Amount on Trial or Pilot Sales
Many companies will need to close a small deal before a complete sale can even be considered. The customer may require a trial or sample order. Again, a sample order for testing does not reflect the full value the opportunity may represent.
In these scenarios, we have provided clients with a variety of opportunity amount fields to utilize which can include ‘Trial Order Amount’, ‘Monthly Fee Amount’, ‘Annualized Amount’ and even ‘Lifetime Customer Amount’.
Formula fields can be used to calculate the totals which minimizes the data entry needed by the salesperson.
Tip #2- Use Different Opportunity Types for Transactional vs. Enterprise Sales
Many Companies Offer the Same Product in Many Varieties
Let’s use electronic circuit boards as an example product. Your company stocks commodity circuit boards that are inexpensive and can sell by the thousands in bulk; you also can customize these stock circuit boards if requested. Finally, you will also do custom design and engineering of circuit boards from scratch based on customer specs.
These three variations of circuit board sale opportunities are best managed by using different opportunity types for each.
The commodity sale is a simple transaction with few data entry fields needed and a total amount representing the bulk sale amount; the design-engineering sale will have many more steps including a trial sample order followed by a longer sales cycle to obtain the final full amount sale.
Tip #3- Understand What Various Users Consider ‘Amount’ to Actually Mean
Different Departments Demand Different Reporting
Depending who is viewing reports related to opportunities will define what the user expects to see.
Executives typically want to know ‘lifetime value’ while sales managers want to know real revenue closed this quarter end. Finance staff will want to understand what they can recognize based on accounting rules. Finally, sales and operations planning staff may also look at opportunity reports to try to anticipate and plan for future production and deliveries.
Tip #4- Allow Users to Calibrate the Amount through ‘Confidence Level Ratings’
Not All Opportunities Are Equally Valid
Typically, the ‘Stage’ definition of the opportunity will assign a pre-set percentage likelihood of the deal closing.
An opportunity at an ‘initial conversation’ stage may be rated at 15% chance of closing, while an opportunity in the ‘contract negotiation’ stage may be rated at 85% likely to close. Total forecasts will use these percentages to create a total reporting amount.
But stage alone often does not provide enough criteria to value the opportunity. In many cases we have added a rating such as ‘Salesperson Confidence Level’ or ‘Manager Confidence Level’ (or even a formula that combines the two) to assign the percentage likelihood of close and override the stage criteria. This is because other attributes may make an opportunity highly likely to close (or not close) even if it is only at a very early stage.
Tip #5- Include Anticipated Delivery Date in the Opportunity
Closed Sales You Cannot Deliver Won’t Help Much
Our work with Salesforce clients has in many cases dramatically increased the volume and velocity of closed sales. One manufacturer we worked with increased the value of closed opportunities from $5 Million one year to $23 Million the following year due to extensive customization of the opportunity module we provided. The sales problem was solved, but a production problem began due to limited manufacturing capacity.
We then modified the opportunity module to track not just the expected deal close date, but also the first date product shipment was expected. From that we could work backwards and use formulas to populate production cycle date fields to assist sales and operations planning staff to manage and plan future production and deliveries.
Finally, due to the very real production capacity constraints of this client, they were able to adjust their pricing and discounting in order to close opportunities which would ship on dates where production capacity was available …..and to quote higher pricing when production capacity was limited. The result over three years was dramatic. This mid-sized manufacturer rocketed from $18 Million in annual sales to over $55 Million.
The views and opinions expressed in this article are those of the authors. Examples cited in this article are only examples. Salesforce®, is a trademark of Salesforce.com, inc.
© 2019 Edgemont CRM, LLC. All Rights Reserved – November 2019