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How To Track Revenue Over Time In Salesforce

How To Track Revenue Over Time In Salesforce

Many businesses need to track revenue over time in salesforce.

For example:

  • Capital equipment items that the customer draws down or pays for over time.
  • Professional services to deliver projects over time.
  • Maintenance contracts in which revenue spans 12, 24 or 36 months.
  • Software-as-a-Service (Saas) licenses on fixed term or open-ended contracts.
  • Transactional items in which you anticipate the customer will buy a significant volume over goods every month, but with no guaranteed amount.

Do any of these apply to you? Perhaps several do.

It’s common for businesses to have a mix of different revenue streams over time on the same opportunity, some managed by framework agreements.

Unfortunately, many companies do one of two things when it comes to tracking revenue over time in salesforce.

The first is they perform this critical activity outside salesforce. They perceive it’s simply too difficult to do in the system.

This means those companies lose valuable visibility of committed and scheduled revenue. This impacts account management, business development, target tracking, revenue forecasting and performance management.

Alternatively, they add numerous fields to the opportunity. These fields capture revenue for Q1, Q2 and so on for each year.

Unfortunately, it’s virtually impossible to produce meaningful reports this way. It also results in one heck of a mess on the page layout.

There’s no need to take either of these routes.

It’s perfectly possible to track revenue over time in salesforce. The result is a significant increase in the benefits you generate from your salesforce licenses.

Two ways to track revenue over time in salesforce

Essentially, there are two options.

Option 1 is to use the standard product schedules feature in salesforce. This works well for many businesses. However, there are significant limitations, which we’ll explain.

Option 2 is to use a custom schedule solution. This solves the limitations of the standard schedule functionality. It’s a dynamic and powerful approach to tracking revenue over time in salesforce that is already benefiting many of our customers.

So let’s start with the standard approach.

Option 1 – Standard product schedules

Here’s how the standard product schedule feature works in salesforce.

The salesperson adds one or more Products to an Opportunity in the normal way.

The salesperson then creates a Schedule for each line item. They do this by clicking on the product line item on the opportunity, then on the Establish button.

This provides the page to enter the details about the schedule for that product on the opportunity.

This generates the product schedule that tracks revenue over time for the first product.

The salesperson repeats the process for any other products on the opportunity.

Advantages of standard product schedules

  • It’s standard functionality with no need to purchase separate app or salesforce.
  • Reports and dashboard chart can track revenue over time using standard product schedules.

Disadvantages of standard product schedules

  • The user interface is cumbersome. For example, the salesperson must drill down to each product line item in order to create the schedule.
  • If the opportunity close date changes, the schedules do not automatically shift. However, you can solve this problem with our Schedule Shifter app.
  • It’s impossible to customize or adapt the standard schedules. For example, you cannot add a Status field to track Booked, Shipped, Invoiced, Paid values. You also cannot schedule by margin or other values.
  • There’s no ability track committed and pipeline revenue over time against current and future targets.

The standard approach is appropriate if you normally have only one product per opportunity and you want an out-of-the-box way to track revenue over time.

Option 2 – Custom Schedules

A custom schedule approach overcomes the limitations of the standard product schedule feature.

Tracking revenue over time in salesforce using custom schedules means you can:

  • Forecast both committed and pipeline revenue over time.
  • Compare revenue over time in salesforce with targets.
  • Update revenue you previously forecasted based on ‘actuals’.
  • Adjust forecasts of future revenue based on current expectations.
  • Analyse revenue over time by product category, territory and other parameters.

Your system administrator can build the custom schedule solution, alternatively or you can use the pre-built GSP Custom Schedule app. We’ll demonstrate how the app works here.

When the salesperson adds one or more products to the opportunity then several additional fields are available.

For each product, these fields define:

  • The method of scheduling the revenue over time. More on this below.
  • The start date when the revenue over time will begin.
  • The number of months for the revenue over time.

Clicking Save simultaneously adds the products to the opportunity AND the associated revenue schedules.

At any time, salespeople can use the Edit Line Item Schedules button to return modify the schedules and change the way salesforce tracks the revenue over time.

Close Date changes

If the opportunity close date changes at any point, then the custom schedules automatically adjust by the same number of days.

For example, if the opportunity close date moves by 20 days then all schedules that track revenue over time also shift by 20 days. This avoids salespeople continuously re-aligning schedules and maintains the accuracy of revenue forecasts.

Track revenue over time in reports and dashboards

Additional information is stored on the schedule including product, margin details and ‘actuals’. This information is available for reports and dashboards.

Track revenue over time against Target

Each custom schedule links automatically to a Target record. This means salespeople and managers can immediately assess whether there is sufficient committed and scheduled revenue over time to meet quota.

Straight-line and S-curve revenue forecast

It’s easy to understand why you want to schedule revenue over time in salesforce using a straight line.

Service contracts, maintenance agreements, repayments on capital goods, Saas licenses – they all need the ability to track revenue over time in a straight line.

However, project work is often different. For example, frequently you have a period of mobilization in the early stages. Then you get into the heavy lifting of the project. Finally a period of testing and commissioning in which the revenue tails off.

An s-curve therefore accurately tracks the revenue on month projects. With the GSP Custom Schedule App, simply select the S-curve option in defining the schedule. The app automatically schedules revenue over time in an S-curve profile.

Advantages of standard product schedules

  • Easy for salespeople to us.
  • Flexibility to define different revenue profiles over time for each opportunity product.
  • Forecast accuracy is maintained because schedules automatically shift when the close date changes.
  • Track additional information over time including margin and actuals.
  • Track pipeline and committed revenue over time in salesforce.

Disadvantages of standard product schedules

  • Requires more setup than the standard product schedule feature (although our app takes care of this).

Many business already track revenue over time salesforce. Don’t hesitate to get in touch if you need our help in becoming one of them.

Volume Based Pricing | 4 Great Ways To Get On The Money

9 Ways To Win Big Using Opportunity Products In Salesforce

How To Make It Easy To Add Products To Opportunities In Salesforce

How To Manage 4 Types Of Framework Agreement In Salesforce

Volume Based Pricing | 4 Great Ways To Get On The Money

Volume Based Pricing | 4 Great Ways To Get On The Money

Daniel Tyler creates an opportunity in salesforce.

Then he opens Excel.

Daniel tinkers around in the pricing spreadsheet for 10 minutes. It happens to be the spreadsheet from three price revisions ago, but never mind.

The spreadsheet gives Daniel the volume based prices he’s looking for. He types the figures into the Quantity and Sales Price fields in salesforce and hits enter.

Then Daniel does the same thing for the other products on his opportunity.

Sound familiar? Or do your salespeople reference a big ring binder file rather than a spreadsheet?

Either way, it’s a common approach to volume based pricing in salesforce.

And it sucks.

Here’s what’s wrong with it:

  • Unnecessary manual effort for salespeople.
  • Increased risk of getting volume based pricing wrong.
  • Inability to track discounts accurately.
  • No guarantee the correct external pricing schedule applies each time.
  • Unnecessary difficulty in calculating product margin accurately.

Furthermore, it is impossible to implement the expert advice on controlling discounts that Tony Hodgson, CEO of Pricing Solutions gave us.

The problem is there’s no standard way to manage volume based pricing in salesforce.

Sales Price x Quantity = Opportunity Line Item Price. That’s as sophisticated as it gets.

However, we helped Daniel’s company fix that problem. You can fix it too.

Here are four ways to manage volume based pricing in salesforce.

Option 1 – Volume based pricing by Bands

This approach to volume based pricing means basing the sales price to the customer on whichever band they fall into.

For example, your pricing table for a product may look like this.

Product Name: XYZ Sales Price Per Unit
1 to 10 units $100
11 to 30 units $95
31 to 100 units $90
…..and so on.

If the customer buys a quantity of 25, the unit price for the entire purchase is $98. If they buy 35, the unit price for the entire purchase is $95.

In other words, the salesperson bases the price for the entire quantity of the product on the relevant band. Of course, if there are multiple products on the opportunity, each one can have a separate set of price bands.

How to implement volume based pricing by band in salesforce

There are two ways to do this.

Using standard salesforce functionality, create a separate Product record for each band. For example, with the XYZ Product, you will have the following products:

XYZ Product 1 – 10                           $100

XYZ Product 11 – 30                         $95

XYZ Product 31 – 100                      $90

And so on.

This is by far the most common approach to volume based pricing in salesforce.

Tip: The band approach to volume based pricing mean an increase in the number of products in salesforce. Consider using the Product Selection Wizard to make it easier for salespeople to select products and add them to opportunities or quotes.

The second option is to use our volume based pricing app. This removes the needs to create multiple products. The salesperson simply selects the product, enters the quantity, and the volume based pricing app does the work of calculating the correct price.

Advantages of band based volume pricing:

  • Easy for the customer to understand.
  • Easy for salespeople to understand
  • Straightforward to implement in salesforce.

Disadvantages of band based volume pricing:

  • Lower average unit price and margin on each opportunity compared to other methods.
  • Significant increase in the number of products stored in salesforce.
  • Quotes and proposals produced directly from salesforce include the band within the product name.

The main issue with band based volume pricing is this.

The bands encourage customers to purchase higher volume in order to benefit from a reduced price. That’s a good thing in terms of volume.

On the other hand, the average unit price reduces across the entire sale. That’s because the lower price applies to ALL units.Volume based pricing by band results in lower average margin for all units.This results in lower total margin. And that, of course, is not such a good thing.

The tier approach to volume based pricing is a way to overcome these issues.

Option 2 – Volume based pricing by Tiers

Volume based pricing by tiers is a variation on pricing by bands. The individual tiers may look the same as for bands in the pricing table.

Product Name: XYZ Sales Price Per Unit
1 to 10 units $100
11 to 30 units $95
31 to 100 units $90
…..and so on.

 

But here’s the key difference.

In band pricing, the customer pays the same price for all units. In tier pricing, the customer pays the unit price for the first tier, the unit price for the second tier, and so on.

In our example, the customer will pay $100 for 1 to 10 units; $95 for units 11 to 30; $90 for units 31 to 100. And so on.

Consequently, the tiers approach to volume based pricing means customers cannot benefit from a lower average price simply through a small increase in quantity.

The result is a higher average unit price compared to band pricing and increased average deal size. It means there’s also a higher total margin on the opportunity.

Here’s how the tier and band approach to volume based pricing compare.Volume based pricing by tiers produces higher average margin than by bands.

How to implement volume based pricing by tier in salesforce

There is no ‘standard’ way to implement the tier approach to volume based pricing in salesforce. However, our volume based pricing app gives salespeople an automated way to calculate tier based pricing on opportunities.

Advantages of tier approach to volume based pricing:

  • Total price to the customer more accurately reflects the volume purchased.
  • Avoids the situation where you are selling more but making less money.
  • No need to create multiple versions of the same product in salesforce.

Disadvantages of band based volume pricing:

  • Harder for prospect to see price at a glance.
  • More difficult for salespeople and marketing communications to give a straightforward product price.

Option 3 – Volume based pricing by increments

The incremental approach to volume based pricing is a more sophisticated version of tiers.

It means the unit prices decreases slightly lower for each reduction of 1 in the volume.

Here’s an example of incremental volume based pricing.

Quantity Unit Price
1 $100
2 $99
3 $98
4 $97
5 $96
6 $95
And so on

 

The incremental approach to volume based pricing allows a different shape of pricing curve. This is appropriate for companies that want a more fine-tuned pricing arrangement than tiers.

Customer example of incremental volume based pricing

ILX sells e-learning and face-to-face project management courses and exams. Sometimes they sell to individual members of the public. Small, medium and large organizations are also customers. These customers extend over five continents.

The company uses incremental pricing to manage this.

This allows ILX to take a more flexible approach to pricing. Here’s what the three volume based pricing methods look like for ILX.Incremental volume based pricing increases the margin compared to pricing by bands or tiers.The incremental approach to volume based pricing allows for a straight line or curve approach to pricing. The curve flattens with higher volume.

ILX goes a step further.

The company has created pricing models for different locations. These models reflect the market conditions in each location.

For face-to-face training, ILX also stores the cost of fulfilment on individual price book entries. This varies by location. Therefore, by combining the location-specific pricing model with the cost of fulfilment, ILX gets a robust and accurate view of the margin on all opportunities.

An overview of how ILX uses product based pricing, and has innovated with many other salesforce features, is available here.

How to implement incremental volume based pricing in salesforce

As with tier pricing, there is no ‘standard’ way to implement the incremental approach to volume based pricing in salesforce.

However, along with bands and tiers, we’ve incorporated incremental pricing in our volume based pricing app.

Advantages of tier approach to volume based pricing:

  • Align the pricing strategy more closely with market segments.
  • Higher overall margin compared to other pricing options.
  • Avoids creating multiple versions of each product.

Disadvantages of band based volume pricing:

  • Harder for prospect to see price at a glance.
  • More difficult for salespeople and marketing communications to give a straightforward product price.

Option 4 – Volume based pricing by product bundles

Product bundles allow customers to buy multiple products in return for a discount or other benefit.  As such, it’s a variation of volume based pricing.

For example, a bundle may contain five products. The customer is motivated to buy the bundle by virtue of a discount. Perhaps she might otherwise have bought only three or four products.

How to implement product bundles in salesforce

The Product Bundle Wizard app makes it easy for companies to sell combinations of products in salesforce.

The app includes a wizard that helps system administrators and product managers create bundles. Salespeople view the bundles in logical tree structure. This makes them easy to identify and select.

Advantages of product bundle approach to volume based pricing:

  • Encourages customers to make larger overall purchase.
  • Pricing and margins controlled within the bundle.
  • Easy for the customer to understand the overall bundle package and price.

Disadvantages of band based volume pricing:

  • Customers may constrain their overall purchase in order to take advantage of a bundle price (perhaps our customer might have bought six products if the bundle wasn’t available?).

Which volume based pricing approach to use?

Look at the average volume per order for each of your products.

The higher the average quantity, the more the difference in volume between the bands tends to grow. Companies often have narrow bands at low volume and larger bands at high volume. This means larger the average order, the more you will be giving away in margin.

However, the band approach to volume based pricing is appropriate when:

  • Volumes are relatively low and bands are narrow.
  • The price implied by the band is only a guide. There is price negotiation between the salesperson and the customer before the order is place.

Conversely, as volumes rise, consider the tier approach to volume based pricing. This is appropriate when:

  • You need to manage margins carefully than the band approach allows.
  • The visible tiers motivate customers to buy increased volume.

The incremental approach provides a granular solution to volume based pricing. Use this when:

  • Tight control over margins is required.
  • Explicit visibility of the benefits of increasing purchasing volume is less important. After all, using the incremental approach, it is harder to communicate the benefits of volume based pricing visible on your web site or other corporate literature.

Remember that you do not need to use the same approach for every product in your portfolio. Combine them within the same product portfolio. For example, the band approach may be appropriate with some products, the tier approach with others, and incremental volume based pricing with yet more.

And of course, if it makes sense in your business to bundle products together, then do so.

Daniel’s approach to volume based pricing

Here’s what Daniel’s company did.

In salesforce, we implemented the tier solution to volume based pricing for the majority of their products using our app. This streamlines the process for Daniel and his colleagues. No more spreadsheets!

For some low volume, less commonly sold products, they implemented the band approach. For these products, there is a lengthy and highly interactive sales process. As such, the prices within the bands are only a guide to the sales team during this process.

The company did two further things. They implemented the Product Selection Wizard. This makes it much easier than the standard layout in salesforce to add products to opportunities. They also implemented the Bundle Selection Wizard. This makes it easy to create and promote logical groupings of products that benefit the customer.

The result? Sales forecasts are more accurate because each opportunity accurately reflects the products the customer is considering buying. User adoption of salesforce is up. Salespeople are more efficient. And there is far greater control over pricing and discounts offered to customers.

In addition, there’s one more result. A 4% increase in average margin per opportunity. And that, I think you’ll agree, is well worth going after.

Further reading

Volume Pricing App

Here’s the Volume Based Pricing app in action. Get in touch today for a free trial.

How To Manage 4 Types Of Framework Agreement In Salesforce

How To Manage 4 Types Of Framework Agreement In Salesforce

Framework agreements exist in virtually every industry.

They are the backbone of many commercial relationships. If you want a long-term relationship with a customer, then get a framework agreement in place.

So naturally, you want to manage framework agreements in salesforce.

Yet companies often struggle to do this.

“We’ve made a dog’s breakfast of it”, as one prospect told me recently.

They weren’t wrong.

So, here’s what you need. The definitive guide to managing framework agreements in salesforce.

Types of Framework Agreement

To manage framework agreements in salesforce effectively, you first have to decide which type of framework you are dealing with. Here are four types of framework agreement you can manage in salesforce.

  1. Drawdown.
  2. Regular Order.
  3. Occasional Order.
  4. License to Hunt.

(If you have a different type of framework agreement, let us know. We’ll figure out how to manage it in salesforce).

1. Drawdown Framework Agreements

Customers ‘drawdown’ a quantity of products against an overall assumed volume.

Often, at the start of the agreement, there is an assumed order quantity each month. In practice, the actual order quantity can often vary from month to month.

Drawdown framework agreements are common in many industries.

For example, based in Greensboro, NC, Gilbarco Veeder Root finalizes a drawdown framework agreement with a petrol retailer for the purchase of a large quantity of petrol pumps.

The agreement defines the products and pricing, commercial arrangements and legal terms of the contract.

The petrol retailer does not want to receive all the pumps in one go. There may be a written minimum and maximum order quantity each month. However, progress on their gas station re-fit programme will determine the actual quantity ordered each month.

2. Regular Order Framework Agreements

Companies that sell large volumes of relatively small-ticket items or consumables often use transactional framework agreements.

The customer places regular orders when they need to re-stock. Often, the customer does this directly via an online portal.

For example, in the UK, Zimmer Biomet sell a variety of consumable products to dental practices.

Zimmer Biomet enters into a framework agreement with the dentist. This agreement specifies the price for each product, together with the support and other services provided by Zimmer Biomet.

The dental practices place orders every few weeks using the Zimmer Biomet ERP portal. This streamlines the end-to-end process of packing, shipping and invoicing each order.

3. Occasional Order Framework Agreements

With these framework agreements, customers place occasional, rather than regular orders.

These occasional orders are often significant in size. The framework agreement covers the commercial terms and over-arching legal terms. However, a separate specification and agreement defines the specific products and services within each order.

Based in Malta, Evolve provide products and services to fit and equip a wide variety of medical laboratories.

Fitting-out each new laboratory is a significant undertaking. A framework agreement is set up with a pharmaceutical company or government department. This agreement defines the pricing and other terms that apply to each contract within the framework agreement.

However, no two laboratories are alike. Each order requires consultancy and detailed collaboration with the customer to define the specific products and services that are required. A separate contract, under the umbrella of the framework agreement, defines the agreed work.

4. License To Hunt Framework Agreements

A license to hunt framework agreement gives one party the permission to seek-out deals elsewhere in the organization or group of companies.

It’s a common agreement in financial services and many other industries.

For example, based in the UK, Hornbuckle Mitchell provide financial services to brokers. They can secure a license to hunt framework agreement in two ways.

First, within a large multi-branch brokerage, the head office team will make framework agreements with selected providers in each market category. This gives Hornbuckle Mitchell permission to visit the branches and convince individual brokers to use their products.

Second, Hornbuckle Mitchell makes framework agreements with buying groups. These financial services buying groups make framework agreements on behalf of many small brokers. The agreements cover fees, training, regulatory services and more. The license to hunt gives Hornbuckle Mitchell permission to visit the members of the buying group to promote their financial products.

How To Manage Framework Agreements in Salesforce

Here’s how to manage each of the four types of framework agreement in salesforce.

1. Drawdown Framework Agreements In Salesforce

Products, combined with standard or custom schedules, are the key to managing drawdown framework agreements in salesforce.
Here’s how.

Create an Opportunity to represent the potential framework agreement. Add Products to the Opportunity to represent the physical goods and intangible services you anticipate the customer purchasing during the lifetime of the framework agreement. (Consider using the GSP Product Selection Wizard to make it easy to add Products to Quotes or Opportunities in salesforce).

Then, for each Product create a schedule that describes how the products and services will be drawdown.

Let’s use an example to illustrate this. Assume the customer anticipates purchasing 216 generators over a 12-month period. To make it easy, we assume each generator costs $1000.

The opportunity has a ‘gross’ value of $216,000 (216 x $1000). That’s the figure in the Amount field.

Add products to the opportunity to represent the goods and services the customer will buy in the framework agreement.

From gross sales perspective, the deal is worth $216,000. However, that’s only half the story.

Forecast Revenue On Drawdown Agreements

We can use revenue schedules to forecast the month-on-month order value.

Revenue schedules project the anticipated income over an extended period. Create a revenue schedule for each product on your opportunity.

This means we get an accurate view of the revenue contribution from each opportunity, over time.

Use revenue schedules to forecast sales on framework agreements.

Using our example, we might assume that on average, the customer will drawdown generators to the value of $18,000 per month.

Optionally, you can adjust the revenue schedule for this month based on the actual value of orders placed. At the same time, you can also update the forecast for future months, based on your latest information from the customer.

You can use a similar approach to forecast the quantity of products the customer will draw-down each month.

Don’t forget you can also use the GSP Schedule Shifter to keep the Opportunity Close Date aligned with your schedules.

Auto Adjust Product Schedules To Match Close Date Changes

Download the FREE App from the AppExchange today

For much more on using the standard revenue schedules in salesforce read 5 Killer Examples Of Recurring Revenue Forecasts In Salesforce.

Custom Schedules for revenue forecasting

The standard revenue schedule functionality in salesforce works well for many of our customers.

But not all.

The problem is the standard feature is not very flexible. You can’t, for example, track the Status of each schedule – Not Ordered, Ordered, Invoiced, Paid.

To do this, you need custom schedules. These give considerable flexibility for revenue and quantity forecasting on framework agreements in salesforce. This has even included s-curve revenue forecasting for some clients.

2. Manage Regular Order Framework Agreements in Salesforce

‘Regular order’ framework agreements in salesforce also need an opportunity.

But this time, the opportunity serves a different purpose. It represents the process of getting a potential customer onto the books.

In other words, the opportunity has a notional value. No orders are placed and no money changes hands on the day the deal is done.

Rather, there is an expectation that the customer will begin placing a flow of regular orders.

The customer will require regular account management. However, there’s no sales process required for each order.

So, here’s what you don’t want to do. Create an opportunity for each new order. Rather, use a custom object to track all the orders that get placed.

At Zimmer Biomet, customers place orders using a portal that gives access to the ERP system. Integration with the ERP system inserts these orders – and associated invoices – into custom objects in salesforce.

It wasn’t always this way, though. Initially, Zimmer Biomet extracted the orders into a spreadsheet each week. The orders were imported into salesforce using the Data Loader. It just goes to show, one person’s integration is another’s import wizard!

For more information on this topic, Import Orders Into Salesforce to Optimize Account Revenue.

Either way, account managers have great visibility of the trend in orders for each customer.

Orders and Invoices imported into salesforce gives account managers great visibility of the trends for each customer.

Zimmer Biomet uses this information to segment customers, drive business development activity and implement marketing campaigns. They also measure account management performance, not on opportunities, but on the quantity and value of orders placed by the customer.

Here’s one more thing they do.

All information about the rationale for any discount is stored in the Chatter feed, directly on the Opportunity. This means it is easily available in the future – certainly compared to hunting for a long lost email.

The reason is this. A large volume of promised future orders may justify a discount. The customer may fall short of this volume. At the very least, you need to know this when it comes to re-negotiating the framework agreement. Storing all the rationale for the original discount in the Chatter feed keeps this information visible and easy to find at the appropriate time.

More tips on controlling price discounts using salesforce.

3. Manage Occasional Order Framework Agreements in Salesforce

Manage the sales process of getting a customer to the point of signature on an occasional order framework agreement by using an opportunity in salesforce.

With this type of framework agreement, there is sometimes an initial order or project to fulfil. However, the key thing is both parties take the opportunity to put a framework agreement in place that will cover future deals.

So far, it’s not dissimilar to the way regular order framework agreements are managed in salesforce.

However, unlike regular order agreements, there’s no expectation of a weekly or monthly flow of relatively small orders. Rather, you need to work proactively with the customer to identify new projects and opportunities.

Unlike regular order framework agreements, manage these future orders through separate opportunities in salesforce. That’s because each one needs its own dedicated sales process.

Here’s another thing.

Often, the framework agreement will define a specific set of product prices that will apply to future opportunities. This means you create a special Price Book, just for that customer.

Use the GSP Auto Price Book Selector to ensure this dedicated Price Book is applied to the customer (and not to any others).

Automatically Assign Price Books To Opportunities

Download the FREE App from the AppExchange today

The Auto Price Book Selector is an effective – and free – way to make sure salespeople consistently apply the right Price Book to the right Price Books

4. Manage License To Hunt Framework Agreements in Salesforce

Manage these framework agreements in salesforce in a similar way to the ‘occasional order’ agreements.

Use an opportunity to manage the sales process of getting the overall framework agreement secured. This opportunity can have a notional value, based on the 12 month or long term anticipated value of related deals.

Be sure, though, to exclude these type of opportunities from your pipeline of ‘paying’ opportunities.

Once the framework agreement is in place, create a separate opportunity in salesforce for the Accounts you are working.

Potentially, use Products and Schedules on these opportunities to define and track revenue over time in salesforce.

So there you have it. 4 types of framework agreement to manage in salesforce. Don’t make a dog’s breakfast of it. Decide first which type of framework agreement you’re working with. Then follow the advice above – or – for a free 30 minute free consultation on managing framework agreeents in salesforce, follow the link below.

Free 30 minute consultation on framework agreements

Get in touch today

Related Blog Posts

Why You Need To Compare Average Closed Won Opportunity Size

How to Bring Your Salesforce Opportunities to Life with Products

The Essential Guide to Salesforce Product Price Books

5 killer examples of recurring revenue forecasts in salesforce

9 Ways To Win Big Using Opportunity Products In Salesforce

9 Ways To Win Big Using Opportunity Products In Salesforce

Every opportunity has a value.

That value is the revenue from the products and services you sell to the customer.

Yet here’s the thing.

The way you record that value on the opportunity has a major impact on the benefits your business can generate from salesforce.

Do it right and you get increased user adoption, better forecasting accuracy, improved pipeline management and superior analysis of individual salesperson performance.

Do it wrong and you get little or none of those benefits.

So what is the right way?

The right way is to use opportunity products.

If you are still in doubt, read Part 1 of this blog post. Part 2 will follow next week. Together, they explains 10 ways to increase your salesforce benefits by using opportunity products.

Product Benefit #1 – Improved usability

One of the best things about salesforce is that it’s easy to create fields.

One of the worst things about salesforce is that it’s easy to create fields.

And that’s what a lot of companies do. They create many salesforce fields to record revenue information about the products and services they sell.

Here’s a real-life example. It’s a screenshot from a new customer.

Too many fields on the opportunity page layout to record revenue about products and services.

This customer created many fields on the opportunity page layout store revenue information. In fact, this is only the top third of the page. We couldn’t get all of the fields into the screenshot to keep it readable!

Not only did this customer have fields for revenue for each type of service they offer, they also had fields to track revenue over time.

It was, frankly, a pain in the tail to enter the information. User adoption is seriously impacted. And it is virtually impossible to create meaningful reports.

The way to avoid these issues is to use opportunity products.  The screenshot below shows an opportunity with two products.

Salesforce becomes much easier for salespeople when opportunity products are used. Clicking and data entry is dramatically reduced.

Salesforce becomes much easier for salespeople when opportunity products are used. Clicking and data entry is dramatically reduced.

Using opportunity products also makes prices much more accessible. For example, in manufacturing companies, or indeed any company dealing with many physical or tangible products, the prices have to be stored somewhere. Often that’s in a ring binder or online spreadsheet.

Using Products means it is much easier for salespeople to find the right price for each type of customer and product selection.

That means improved usability and increased salesforce adoption.

How to extend this Product Benefit

The GSP Product Selection Wizard makes it even easier to add products to opportunities. This means average deal size is increased, sales person productivity is improved and user adoption is raised. 

Recommended blog post

Bring Your Opportunities To Life With Products

Product Benefit #2 – Improve Opportunity Accuracy

Robust pipeline visibility and reliable forecasting require opportunity amounts to be accurate.

This is unlikely if salespeople simply enter a single figure into the Amount field. The value of the opportunity is invariably going to be a guestimate.

Far better to use Products to calculate the opportunity amount.

This way, salespeople enter the unit price, quantity and any discount. It also means there’s a breakdown of the opportunity amount by product category and individual product item.

The value of both opportunity product line items roll up to the Amount field.

The value of each opportunity product line item is calculated. The total value of all product line items rolls up to the Amount field.

The result is much improved accuracy in opportunity values.

Tip: if you offer volume based pricing then don’t leave salespeople to work out prices outside of salesforce. There are four ways to manage volume based pricing directly within salesforce.

Product Benefit #3 – Improve Pipeline Visibility

Using opportunity products improves the accuracy of individual deal values.

But it also means that dashboard reports and charts are significantly improved.

For example, here’s the pipeline report from the customer that had lots of fields on the opportunity.

Too many fields on the opportunity make it difficult to get good quality pipeline reports.

The reports lists the opportunities in the pipeline. But it’s a far cry from a concise, usable pipeline report needed to manage the funnel effectively.

Here’s the same information. This time we’ve re-built the report using Products.

Using opportunity products means accurate revenue amounts and robust pipeline dashboard charts.

The improved chart means the key information can be understood much more quickly.

Using products also means the pipeline can be analyzed by product category.

Report in salesforce showing pipeline by product family.

This means reliable forecasts can be created by individual products.

For manufacturers like Gilbarco Veeder Root, this is crucial information. These reports inform the production levels within the factory. For companies like Invennt, who provide consulting resources, it means accurate manpower planning.

And for everyone, it means the strength of the pipeline can be understood and interrogated by product category.

Make It Fast & Easy To Add Product To Opportunities Or Quotes

Download the FREE App from our website today

Product Benefit #4 – Identify Development Needs

Look at the dashboard chart below. It show salesperson performance by average deal size.

Average deal size dashboard chart created using opportunity products.

The dashboard chart is a starting point for analyzing why some salespeople may have higher overall sales than others. However, to get meaningful information, that can help identify individual development needs, we need to dig deeper.

For example, the dashboard chart below analyses average deal size by product category.

Analyzing average deal size by product category reveals more insight into salesperson performance.

Each product is allocated a category – Core, Optional, Service. The dashboard chart clearly shows that Dave is better than his peers at including non-core products in his deals. In other words, Dave increases the average value of his opportunities by including non-essential products and services.

Simply telling salespeople to sell more optional or non-mandatory products is unlikely to have a significant impact. Yet now we can identify the development needs of each salesperson more precisely.

Remember, the chart, in itself, does not tell us specifically how Sarah can increase her average deal size. Perhaps she needs to improve her technical understanding of other products. It could be she needs coaching on how to introduce the other services. Potentially she needs to work harder during the Investigation Stage of the sales cycle to understand better the potential customers’ needs.

Analyzing performance using opportunity products does not automatically give us the answer. But it certainly tells us where to start looking.

Recommended blog post

Why You Need To Compare Average Closed Won Opportunity Size

Product Benefit #5 – Price More Selectively

When it comes to product pricing, one size certainly does not fit all.

Different market places will support different pricing. Countries and geographical regions may justify different prices. The cost of fulfillment may differ between territories or certain marketplaces will support a higher margin.

You may also chose to give not-for-profit customers a lower price. Some companies also have client-specific pricing. Perhaps you have exclusive pricing arrangements with strategic customers.

To handle this variability properly in salesforce means you need to use opportunity products. This is because using Products with opportunities means you can also use Price Books.

A Price Book is a selection of products along with their List Prices. Here’s an example.

Let’s say you have a product with a standard List Price in the United States of $1000. 

Using Price Books means you might have the following List Prices for this product

  • $1000 for standard customers in the USA.
  • $900 for strategic customers in the USA.
  • $800 for not-for-profit customers in the USA.

There could be many additional variations based on geography or territory. For example, the Eurozone Price Book or UK Price Book may have different prices than the straight-forward exchange rate equivalent. This may reflect differences in fulfillment costs or variances in what the market will bear in those territories. 

Here’s how these prices get applied.

The salesperson defines the price book that will apply to each opportunity. The Price Book contains the products and prices that apply within that price book.

Product price book associated with an opportunity in salesforce.

Chose the right price book on the opportunity and you have the right set of prices.

You can even go a step further.

Not all products need to belong in each price book. Perhaps, for regulatory, commercial or technical reasons, a specific product cannot be sold in Europe. Then simply exclude from the European Price Book. When the European Price Book is added to an opportunity, the product will not be available for selection.

Automated price book selection

You may have spotted the potential human error with Price Books.

What happens if the salesperson adds the wrong Price Book to the opportunity? The result is incorrect prices are given to the customer.

There’s a way to avoid this problem and it won’t cost you a penny to implement. It’s the GSP Auto Price Book Selector. It’s free on the AppExchange.

The Auto Price Book Selector automatically assigns the relevant Price Book to an opportunity. It ensures the right prices are given to the right customers.

Recommended blog post

The Ultimate Guide To Product Price Books In Salesforce

Product benefit #6 – Track Revenue Over Time

Very often revenue associated with a sale is not invoiced in one go.

Quite the reverse.

It may take many months for the revenue to materialize. For example:

  • Service contracts, with regular, repeat revenue over one, two or three years.
  • Framework agreements, in which goods and services are ‘drawn-down’ over time.
  • Professional services, with projects that may take several months to complete.

In each case, it’s important to track how revenue materializes over time. This results in improved revenue forecasting and more predictable cash flow.

To do this, you need to use opportunity products in conjunction with standard or custom product schedules.

Here’s what a salesforce dashboard revenue chart and report look like based on product schedules.

Opportunity product scheduled revenue displayed on a salesforce dashboard chart and report.

The chart and report don’t show the ‘gross’ value of deals. Rather, they measure the scheduled opportunity product revenue.

Many of our customers forecast scheduled revenue over time in this way.

How to extend this Opportunity Product Benefit

There is a challenge in salesforce with keeping opportunity product schedules aligned with the opportunity close date.

For example, let’s say the close date on the opportunity is April 1. The revenue on each opportunity product may be scheduled to start May 1. But what if the close date changes? It means the revenue schedule must be adjusted. In salesforce, this has to be done manually. But that means the adjustment is often forgotten about!

The solution to this is the GSP Schedule Shifter.

The Schedule Shifter automatically moves opportunity product schedules when the Opportunity Close Date changes. This maintains the accuracy of revenue forecasts.

Here’s a short video and more information on the Schedule Shifter in action.

Recommended blog posts

Use Product Schedules To Improve Revenue Recognition

5 Killer Examples Of Recurring Revenue Forecasts In Salesforce

Product Benefit #7 – Increase Price Discount Control

To reduce the amount of discount given away, use opportunity products to implement discount approval processes.

Here’s an example of how price discounts can be calculated and managed using opportunity products.

Using opportunity products means greater control over price discounts given away by salespeople.

The sales person enters the discount percentage for each opportunity product. In this case, 10% discount has applied to each opportunity product.

The total discount amount rolls up to the opportunity. That’s $4,000 in this example.

The overall price discount on the opportunity is 5.7%. That’s because although 10% has been applied to each opportunity product, the value of each line item is different. In other words, across the board, the discount on this opportunity is only 5.7%.

We can see that on this opportunity, the discount amount has been approved. This is done using the standard approvals functionality in salesforce.

Recommended blog post

10 Expert Tips To Improve Discount Approval Processes

Product Benefit #8 – Close Deals More Quickly

Using Products opens the door to two ways that radically speed up deal closure.

First, accurate products on the opportunity means they can be output into a quote document. This avoids salespeople having to re-key and re-enter information. It also means templates containing the up-to-date set of set of terms and conditions are used consistently across the business.

Second, combine the quote with an electronic signature application such as Docusign or Echosign.

These electronic signature applications integrate tightly into salesforce. They make it super-easy for customers to commit to contracts in a robust, legally binding way.

Our customer, project management training provider ILX, take it even further. They have embedded the process of validating whether a PO is required, and capturing that number where appropriate. This means they have a super-tight contract signature process.

Recommended blog post

Product Benefit #9 – Sell Bundles Of Products

One way to increase average deal size is to sell bundles of products.

Our customers use product bundles in two key ways.

First, to group technical products together. The bundle of products comprise the solution offered to the customer.

Secondly, they offer promotional product bundles. These bundles offer discounts or additional products that are available for a limited amount of time. They are intended to drive sales for a specific period.

There is no pre-built product bundle capability in salesforce. So instead, use the GSP Product Bundle Wizard.

The wizard contains features that enable system administrators or product managers to create product bundles easily. Salespeople have a user-friendly interface for selecting the bundle and adding the component products to the opportunity or quote.

Product bundle allows multiple wizard products to be added to the opportunity at the same time.

Price book integrity is preserved, which means that bundles can only be added if they match the price book associated with the opportunity.

Recommended blog post

GSP Product Bundle Wizard overview.

Recorded Webinar | 10 Ways To Win Big Using Opportunity Products

Watch the full webinar with Gary Smith and Nick Ambrose from GSP, and special guest Robby Johnson from Ellison Technologies. Gary, Nick and Robby explain and demonstrate all 10 ways to win big using opportunity products.

Related Blog Posts

Why You Need To Compare Average Closed Won Opportunity Size

How to Bring Your Salesforce Opportunities to Life with Products

The Essential Guide to Salesforce Product Price Books

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Top 5 Usual Suspects – Opportunity Mistakes In Salesforce That Are Easy To Fix

Top 5 Usual Suspects – Opportunity Mistakes In Salesforce That Are Easy To Fix

I have reviewed hundreds of existing salesforce implementations.

And seen many mistakes.

But there are five opportunity mistakes that jump out all the time.

They are the usual suspects.

Yet the thing about them is, they are easy to fix.

Addressing each opportunity mistake alone, will:

  • Make salesforce easier to use. That improves user adoption.
  • Improve reports and dashboards. That improves pipeline management.
  • Enable more robust opportunity management. That increases win rates.

So here they are. The usual suspects. And here is how you fix these common salesforce opportunity mistakes.

Opportunity Mistake #1 – Badly designed Opportunity Stages

The standard opportunity stages in salesforce do not fit well with the sales process in many businesses.

So it is perfectly sensible to change them. But sorry to say, businesses often do it badly.

Here are the most common mistakes with Opportunity Stages.

  • Too many stages. This happens when the sales cycle is broken into a too granular series of stages. This makes it difficult to make sense of pipeline dashboard charts and reports.
  • Ambiguous stages. When opportunity stages are unclear, salespeople will not be able to update the opportunity accurately. The result is managers cannot assess the sales pipeline with any confidence.
  • Stages as milestones. This happens when stages represent a specific milestone or task (e.g. Meeting Booked, Proposal Sent). It is difficult to define a sales process or get a sense of what is happening on the Opportunity over time when this happens.

For example, here’s a real-life example. It’s a dashboard chart taken from a salesforce environment that had way too many opportunity stages.

Example of a dashboard chart taken from a salesforce environment that had too many opportunity stages.

To fix this opportunity mistake, take these actions:

  • Consolidate stages. Combine two or more existing stages into a single opportunity stage. Update existing opportunities to reflect the new value.
  • Define stages carefully. Think-through the opportunity stages and their definition. Have someone not involved directly in sales, review and challenge your stage definitions.

Here is another blog post I wrote specifically about opportunity stages. It contains additional advice on setting opportunity stage values.

3 Common Mistakes With Opportunity Stages And How To Fix Them.

Opportunity Mistake #2 – Not Using Opportunity Products

Earlier this week I reviewed an existing salesforce environment for a potential customer.

They were making the opportunity mistake common to many companies. Multiple ‘amount’ fields on the opportunity. In fact, they had created 24 fields. All to capture information about the different products and over-time revenue streams associated with an opportunity.

The page layouts are highly confusing. User adoption is a problem. And the reports are a nightmare – too complicated, no workable information.

However, it is a common opportunity mistake.

The solution is to use Opportunity Products. (In some cases, use Product Schedules as well).

Virtually every company that has salesforce should use Products (even Service companies).

A Product, in this context, can be anything that generates revenue. A day of professional services, manufactured items, maintenance contracts, license fees, widgets. They are all examples of Products.

Here are some of the benefits you get from using Opportunity Products.

  • Accurate opportunity amounts. Base the total value of the opportunity on the specific price and quantity of products.
  • Improved pipeline visibility. Monitor the size, trend and quality of the pipeline by product category.
  • Identify training and development needs. Compare average deal size, number of products and type of products across salespeople.
  • Pricing control. Use approval processes to control price discounts.
  • Forecast revenue over time. Combine products and schedules to forecast revenue over months or years.
  • Streamline processes. Re-design contract and fulfilment processes.

If you have many Products, then consider using the GSP Product Selection Wizard to make it easy for salespeople to add Products to Opportunities or Quotes.

Use the GSP Product Selection Wizard to make it easy for salespeople to add Products to Opportunities or Quotes.

Here are blog posts that give more guidance on using Products and Product Schedules.

Missing Out On The Value Of Products? Learn The Basics

5 Killer Examples Of Recurring Revenue Forecasts In Salesforce

Manage 4 Types of Framework Agreement In Salesforce

4 Ways To Manage Volume Based Pricing In Salesforce

Opportunity Mistake #3 – Not Using Contact Roles

Even a simple B2B purchase rarely involves only one person.

“The number of people involved in B2B solutions purchases has climbed from an average of 5.4 two years ago to 6.8 today, and these stakeholders come from a lengthening roster of roles, functions, and geographies.” Harvard Business Review, March-April 2017.

However, not using Contact Roles is another common opportunity mistake in salesforce.

It’s not perfect. On the other hand, it is a standard feature that is easy to configure and use.

Contact Roles is a standard salesforce feature that is easy to configure and use.

The benefits you will get from using Contact Roles include:

  • Increased rigour in managing opportunities. The simple act of populating Contact Roles, forces salespeople to think about their stakeholder management approach.
  • Improved management team contribution. Often it is hard to define the decision maker, versus an influencer versus the financial approver. Yet surfacing this information in Contact Roles promotes healthy debate about the role played by each individual.
  • Improved long-term visibility. Using Contact Roles makes it significantly easier to identify the stakeholders that keep cropping up over time.

There is more on Contact Roles, including advice on the Role picklist values, in another of our blogs:

The Right Way And The Wrong Way To Track Opportunity Stakeholders

Opportunity Mistake #4 – Not using Chatter on the record

On any major deal – and even on many small ones – there will be a lot of communication between internal stakeholders.

Pricing, strategy, pre-sales demonstrations, stakeholder management and lots more. They are all the subject of extensive discussion.

However, managing that internal communication by email is a common opportunity mistake.

Using email for this dialogue means:

  • It’s difficult to revisit important discussion e.g. on discount decisions.
  • Important dialogue about the opportunity is dis-jointed.
  • Less clogged up inbox. Surely, we all want that!

Indeed B2B pricing consultant, Tony Hodgson, attributes many needless price discounts to email.

“Let’s say you give a 10 percent discount to the customer first time around. The dialogue around the internal justification and approval will nearly always be by email. A year down the line, the customer asks for a further discount. Chances are they are going to use the same justification in their argument that they used previously. Yet you consumed that justification in the original discount. But unfortunately, everyone will have forgotten and it’s virtually impossible to find the documentation.”

Far better, says Hodgson, to use Chatter, directly on the Opportunity.

Use salesforce Chatter directly on the Opportunity.

“Conducting the internal dialogue on the Chatter Feed within the Opportunity leaves no doubt as to where the justification and documentation resides. It’s there forever and a day. Maybe you’ll still agree to the discount – but at least you’re doing it with full knowledge of what went before”.

10 Expert Tips To Give Away Smaller Price Discounts

Opportunity Mistake #5 – Close Dates in the past

Unless you have a time turner, opportunities will not close in the past.

However, this is a very common opportunity mistake. An open pipeline that contains deals with a close date earlier than today.

In fact, many pipelines contain deals that are months out of date. This is a real-life example of what that looks like in a dashboard chart.

Pipeline has lots of opportunities with close dates in the past.

The impact of having out-of-date opportunities in the pipeline includes:

  • Poor quality pipeline visibility.
  • Inaccurate performance metrics e.g. errors in win-rate percentages.
  • Inability to forecast reliably.

The way you fix this problem depends on the scale of the situation and the resources at your disposal. You have the following choices:

  • Sweep the problem under the carpet.
  • Fix the problem yourself.
  • Get the sales team to fix the dates.
  • Take broad-brush approach with a mass update of opportunities.
  • Adopt a hybrid approach incorporating several of the above.

This is such a common opportunity mistake that I have written an entire blog post about it. It describes each approach to solving the problem in more detail and explains when they are appropriate.

Don’t Let The Best Dashboard Chart Look Like A Bedraggled Washing Line

So there they are. The top five opportunity mistakes in salesforce. Go ahead, and fix the usual suspects in your business.

Make It Fast & Easy To Add Product To Opportunities Or Quotes

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Link Close Dates To Product Schedules To Avoid Warped Forecasts

Link Close Dates To Product Schedules To Avoid Warped Forecasts

Here is something that will inevitably your revenue forecast utterly wrong if you are using Product Schedules in salesforce.

The salesperson modifies the opportunity close date.

But then, she does not make the same date adjustment to the Product Schedule.

To be fair, it’s an easy thing to forget. And to use a technical term, it is a right pain to do.

Using standard salesforce functionality, the salesperson needs to go to each product on the opportunity. Then she needs to modify each product schedule. Individually.

It takes time. It is a distraction. And it almost never happens.

The root cause of the problem is that there’s no link between close dates and product schedules. Unfortunately, that means revenue forecasts that rely upon product schedules are nearly always wrong.

And over time, the problem gets worse. Both pipeline and won revenue reports become increasingly inaccurate.

Fortunately, it doesn’t need to be that way. The Schedule Shifter App solves the problem. It directly links the close date with product schedules.

Link Close Dates To Product Schedules

The Schedule Shifter links the close date to product schedules. This means that whenever the close date changes, the product schedules are automatically adjusted by the same number of days.

The close date can move forwards or backwards in time. The Schedule Shifter will keep the product schedules aligned with the close date. And if there’s already a delay between the close date and the start of the product schedule, then that delay will be respected when the schedules are automatically modified.

The Schedule Shifter works with both revenue and quantity product schedules. It’s particularly useful for accurate forecasts on ‘regular order’ framework agreements.

It’s simple to install. We’ll give you a link to a private listing on the AppExchange. And it’s great value at $700 per year for unlimited users. Find out more.

Schedule Shifter In Action

Related Blog Posts

12 Must-Have Salesforce Dashboard Charts | With Video And Examples

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When Recurring Opportunities Are Right (And When They Are Not)

When Recurring Opportunities Are Right (And When They Are Not)

When Recurring Opportunities Are Right (And When They Are Not)

Not every sale results in a single, one-off invoice and payment.

Many result in multiple payments over time.

But here’s a common mistake companies make in salesforce.

They use recurring opportunities when they shouldn’t. And sometimes they don’t use recurring opportunities when they should.

Here’s what happens if you do this:

  • Your sales process is far more convoluted than it needs to be.
  • It will be difficult to get accurate pipeline visibility.
  • Key sales metrics such as the number of month close date changes, days since last stage change and open age of the opportunity will be distorted.

So here are five situations where recurring opportunities potentially have a role to play in salesforce.com.

In each of these commonly-occurring scenarios, companies receive multiple payments over time. So when are recurring opportunities required?

Here’s a simple way to answer this question. Determine whether the future revenue is in jeopardy.

If the answer is yes, then recurring opportunities are probably required. If the answer is no, then you probably don’t need recurring opportunities.

Here’s how recurring opportunities apply – or don’t apply – to each of the situations above.

Recurring opportunities with software as a service

Based in Paris, our customer Sidetrade provides predictive software to accelerate credit management and the sales-to-cash cycle.

The platform is delivered on a SaaS basis and customers generally sign-up for a fixed term contract for a number of years. Payment is on an annual basis.

Sidetrade doesn’t need recurring opportunities.

This is because the future revenue on the contract is not in jeopardy. The opportunity is closed won. The customer is committed via the contract.

So instead of recurring opportunities, Sidetrade forecasts future revenue using Schedules.

For sure, Sidetrade will aim to sell additional services or upgrades to the customer. But Sidetrade handle these via additional opportunities. But these are new opportunities for incremental revenue rather than recurring opportunities.

Recurring opportunities with insurance premiums

Based near Toronto, another customer, Aboriginal Insurance Services (AIS) sell insurance products to the Indigenous Native American communities across Canada.

For example, the community will purchase motor insurance to cover all vehicles operated by the municipal community.

The insurance and premium is for one year of cover. AIS will aim to renew the policy with the community. But this is not guaranteed.

In fact the future revenue is in considerable jeopardy. Competitors will seek to undercut AIS or challenge the incumbent company in other ways.

So it’s right for AIS to create a recurring opportunity to manage the renewal. It is a separate sales process. AIS will apply proactive key account planning and optimize their chances of success but there is no certainty of a positive outcome.

12 Must Have Charts For Your Salesforce Dashboard

Download the FREE eBook today from our website

Recurring opportunities with service contracts

Based in Yorkshire in northern England, MAM Software sell advanced software and hardware to support the automotive logistical supply chain in the UK and USA.

The company sells support contracts that cover the software and hardware. These typically run for 3 – 5 years.

The customer pays an annual fee for the support.

But MAM don’t use recurring opportunities. That’s because the customer is committed contractually for the duration of the support arrangement. The revenue is secured. It’s not in jeopardy.

To manage this MAM have a single opportunity. They use Products with Schedules to forecast the future revenue. This means MAM have an accurate, forward looking view of secured revenue.

It also means the pipeline for new opportunities provides a clear picture of future income if the deal is won.

Recurring opportunities with Proof of Concepts

Another London based customer, Modernis, provides advanced analytics and consultancy services to the insurance and re-insurance markets across the UK, USA and Europe.

The analytics products are offered in a software-as-a-service platform. The sales process often involves a two stage process.

First, Modernis sometimes provide chargeable proof-of-concept access to their platform. Then, once customers have experienced the value that the platform brings, Modernis will sell access via a contract that runs for a number of years. This contract incorporates an annual license charge.

To manage this, Modernis create two opportunities. The first represents the sales process for the chargeable proof-of-concept. A trigger then automatically creates a second opportunity, this time to manage the full contract sales process.

So the company uses recurring opportunities – at least of a type. This is because the full contract is not a given. It depends on a successful outcome to the proof of concept.

Modernis also forecast the future revenue on the full contract using Schedules. This is because this revenue is not in jeopardy. Therefore no recurring opportunity is required.

Framework agreements in salesforce

Gilbarco Veeder Root (GVR) is one of the world’s leading manufacturers of petrol pumps and retail equipment. Based in Greensboro, North Carolina, the company has a salesforce deployment covering six continents.

A GVR opportunity may often relate to a major site re-fit program for one of the major petrol retail companies.

The refit program may take the petrol retail company several years to complete. It’s likely to require a large-scale purchase from GVR.

One the one hand, both parties want to benefit from the pricing and security of trading that is reflected in a long term commitment.

On the other hand, the customer doesn’t want all the petrol pumps manufactured and delivered in one go! Rather, they want to ‘draw down’ the units as and when the refit program is ready to install them.

So the total value of the contract is agreed (usually within an agreed range). But the month-on-month revenue is more volatile.

GVR handle this with a single upfront opportunity. The company uses custom revenue schedules to predict the volume and revenue that is anticipated each month. Then, when the actual trading volumes are known, the GVR Account Manager updates the schedule with the actual number and value of orders placed.

This allows GVR to track the projected volume (upon which the commercial terms were agreed) with the actual volume ordered by the oil company.

Recommended blog post: How To Manage 4 Types of Framework Agreement In Salesforce.

Points to consider when you need recurring opportunities

  • You need a process to manage the sales process on the recurring opportunity. Remember, the revenue is in jeopardy. It’s not guaranteed. That means you need a well thought out process that maximizes the probability of securing that revenue.
  • Consider triggering the recurring opportunity automatically. This will avoid the recurring opportunity from being forgotten about. That trigger can happen when the original opportunity is won or at some other pre-determined point in the process.
  • Measure the win-loss ratio for the recurring opportunity separately to the initial opportunity. In other words, the ratio of won / lost deals on recurring. Improve your process.

Points to consider when you don’t need recurring opportunities

  • There are several different ways to track the value of the sales. These include the total upfront sales value and the revenue recognition on a quarterly or annual basis.
  • Use Products and Schedules to forecast the revenue over time. Read this blog post for more advice on how to do this.
  • Consider custom revenue schedules if you need additional flexibility. For example, if you need to record the status (not due, invoiced, paid) on individual schedules then you will need custom revenue schedules.

Not every sale results in a single payment or transaction. Use recurring opportunities when it is right to do so. And if it isn’t right, then try revenue schedules instead.

Make It Fast & Easy To Add Product To Opportunities Or Quotes

Download the FREE App from our website today

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Link Close Dates To Product Schedules To Avoid Warped Forecasts

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Demo | Product Selection Wizard And Product Bundles In Salesforce

Watch Gary demonstrate how to make it easy to add Products and Product Bundles to opportunities in salesforce.

For a no-obligation personalized discussion about how to make it easy to add Products to Opportunities in your business, simply fill in the form below.

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10 Expert Tips To Improve Discount Approval Processes

10 Expert Tips To Improve Discount Approval Processes

Every price discount eats into your profit.

Probably more than you think.

“Most companies can increase profit between 2 and 4 percent by doing nothing other than getting a grip on price discounts”, says pricing expert Tony Hodgson of Pricing Solutions. “And key to this is an effective approval process”.

He’s right. Let’s imagine your ‘fully loaded’ margin on an opportunity is 10 percent. (That’s the margin including indirect costs, not just the product gross margin).

Price discounts apply to gross revenue. So a 5 percent price discount means giving away half your profit. Discount more than 10 percent and the deal is loss making.

The fully loaded margin in your business is probably a different figure. But you understand the impact.

“Too many companies are at the ‘fireman’ stage when it comes to price discounts. They rush from opportunity to opportunity dealing with discount emergencies,” says Tony.

“The first step is to agree a discount policy and make sure it is adhered to. That means having a robust approval process in place.”

So we interviewed Tony. Picked his brain about approval processes.

And guess what? He gave us 10 powerful approval process tips.

And here they are. Along with our advice on how to implement the tips in salesforce.

Tip 1. Implement an effective approval process

“Too often authorization for price discounts is handled in a haphazard and informal manner. That almost guarantees you are giving away unnecessary discounts and eating into your profits”, says Tony. “It sounds obvious but defining a discount policy and using a robust approval process for price discounts is the first step”.

Implement Approval Processes in salesforce

Use the standard approval process function in salesforce to achieve this. If you’re unfamiliar with how approval processes work then watch this short video from GSP Senior Consultant Nick Ambrose.

There’s plenty of online help that explains how to configure approval processes.

Or of course get in touch if you’d like our help.

Tip 2. Avoid rounded discount levels in approval processes

“Companies typically give discount of authority levels of 10, 15 or 20 percent in their approval process”, says Tony. “But remember, that’s a discount on the gross revenue. Every 1% of revenue you give away is having a disproportionate impact on the margin for that deal.

Sales people will often take the path of least resistance. That means if the customer asks for a discount they’ll go straight for 10 percent if that’s their authority level. So why not give them authority of 9 percent? Or 7.5?

The same with higher authority levels in the approval process. Instead of giving managers authority levels of say, 20 percent, give them 17. All our evidence shows there’s almost never any impact on win rates but you gain a major increase in opportunity margin”.

Implement non-rounded authority levels in salesforce

Any number you chose can be used for each level of authority in the approval process. For example, make the approval process entry criteria 7 percent. This means any opportunity with a discount greater than this figure needs approval.

Avoid rounded discount steps in approval processes.

Tip 3. Record what was agreed in the approval process

Tony’s third tip is to keep a record of what was approved and why.

“Let’s say you give a 2 percent discount based on a certain rationale. 12 months from now you don’t want to give away more discount for the same reason. The discount for that rationale has already been taken by your first discount.

“A big issue in many companies is that the reason for a discount is not visible later”, says Tony. “Email isn’t the ideal place for this. It’s impossible for people not directly involved in the discussion to access the information. And even if you are involved, it’s not easy to quickly find the information 12 months later”.

Record what was agreed in salesforce

Often there’s dialogue between a sales person and the manager before the approval process is formally started. Many companies that use approvals processes effectively store this dialogue on salesforce Chatter. That means the information is stored directly on the opportunity, for all to see, for all time.

Use Chatter in salesforce to record the discussion about deals the approval process.

When approving or rejecting an approval process request, the approver can also enter a justification into the comments box. That’s an excellent way of keeping a record of precisely why the approver made this specific decision.

Tip 4. Re-visit opportunities after the deal is done

Tony recommends reviewing deals 6 months after the paperwork was signed.

“Check that the customer is sticking to their side of the commitment. For example, if you gave a 5% discount in return for a guaranteed order of 1000 units per month, then check that’s what the customer is actually ordering. Sometimes it won’t be.

That doesn’t mean you have to go back to the customer in an aggressive way. Perhaps their project has been delayed. But you do at least want to shift the balance of power by making sure they’re aware of the broken commitment. And avoid falling into the same trap again”.

How to schedule re-visits in salesforce

There’s two simple ways to do this. Option one is to create a custom date field on the Opportunity. When the deal is set to Closed Won populate this field with the review date. If this is done manually (rather than by using a workflow rule) then apply a validation rule to make sure a date is entered.

Option two is to create a Task. Set the date 6 months hence and give it a Type of Deal Review.

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Tip 5. Make the profit impact visible during the approval process

Tony insists discount requests are approved or rejected with full knowledge of the impact of the profit of each deal.

“Each 1% of discount has a greatly magnified impact on the net margin of each opportunity. Approvers need knowledge of this impact when they are considering deals in the approval process. Otherwise you run the risk that many deals have borderline profitability.”

How to calculate the net margin on each opportunity in salesforce

To do this accurately your business needs to be using Products on Opportunities. (In addition to calculating net margin there are many other reasons why you should be using Products).

Then there are two options depending on the level of sophistication that’s necessary to give approvers the information they need.

The first option works well if the fully loaded unit cost does not vary by territory or customer type. In other words, the same cost can be applied irrespective of where the product is being sold.

To do this create a custom field on the Product to store the fully loaded unit cost of the Product. Then use a formula field on the Opportunity Product Line Item to calculate the Quantity multiplied by the Product unit cost. This tells you the total cost of the Product on that particular Opportunity. Sum this value for all Products on the Opportunity using a workflow rule.

The second option is appropriate if the cost of fulfilment varies from one region or segment to another. For example, in the ILX Group, the cost of delivering training courses varies significantly by geography. This is reflected in the price at which training courses are sold around the world.

The price variation is managed through the use of Price Books aligned to each geographical territory. ILX then created the Unit Cost field on the Price Book Entry. This allows the variable cost to be reflected on the opportunity line items. Again the total cost is summarized on the opportunity.

Either approach means the total net margin can be calculated. It’s the Amount minus the total net cost of the Products. It means managers can take the margin figure into account when deciding whether to accept discount requests in the approval process.

Enter a reason for approval or rejection in the approval process. Record the reason why a discount is given during the approval process.

Tip 6. Streamline the approval process

It’s natural to think that the more steps in the approval process the more unlikely it is that unnecessary discounts will be given away.

“But that’s not always the case”, says Tony. “Stripping out levels of authority has a remarkable impact.

For example one of our manufacturing clients had six levels of authority in their approval process. Yet we still found lots of evidence of unnecessary discounts. So they stripped four levels out of the approval process.

Now managers have authority up to 9 percent. If the sales person wants a higher discount, the approval request goes direct to the CEO. And guess what? They usually don’t ask for discounts of more than 9 percent. Win rates have remained stable. But profitability has improved”.

How to streamline approval processes in salesforce

Think carefully about the approval process steps needed in your business. Then configure the Entry Criteria and Steps in the Approval Process function that will support your streamlined process.

Tip 7. Measure win rates

Many companies have differential pricing between geographical territories or market segments. That means there needs to be flexibility in the discount policy.

“It’s important to test and validate changes to the discount levels” says Tony. “The best way to do this is by measuring win rates over time and across territories or segments. That gives quantitative data that can be used to evaluate and adapt pricing and discount approval processes.”

How to measure win rates in salesforce

There are various approaches to measuring opportunity win rates. We believe the only robust way is to compare the number and value of opportunities Closed Won and Lost in a given period. It’s an important topic and we’ve written an entire blog post on measuring win rates.

Tip 8. Make sweeteners explicit in the approval process

“It’s a fact of life that sometimes you need to offer inducements to win a deal”, says Tony. “Free delivery. Non-chargeable training. Upgraded support contracts. Add-ons at no charge. They’re all legitimate ways to get a deal across the line. But there’s a cost to fulfilling them. Or an opportunity cost in lost revenue. So they’re all forms of price discount.

The key is to make sweeteners explicit in the deal. If you’re giving away free delivery, fine. But make an above-the-board conscious decision to give free delivery and include the value as discount in the approval process”.

How to make sweeteners explicit in salesforce approval processes

The key to this is making sure that all elements of the customer solution are captured on the opportunity in salesforce.

Using Products is one way to do this. Items such as delivery, service contracts and optional components can all easily be created as Products. Consider using the product selection wizard to make it easy for sales people to add products to opportunities in salesforce. Let sales people set the sales price to zero for freebies included in the deal.

If you are not using products then create custom fields on the opportunity to capture information about what is included in the deal given to the customer.

Either way, managers it means that are asked to review a deal in the approval process now have a holistic view of the cost and revenue associated with the opportunity.

We have a fantastic video case study that shows how ILX uses products to generate a wide range of benefits including full control of discounts within approval processes.

Tip 9. Track discounts by teams and individuals

“Some people are just naturally better at resisting customer demands for discounts”, says Tony. “New or inexperienced sales people often find it more difficult, for example. But teams or individuals that are under pressure to hit quota are also prone to giving unnecessary discounts.

There are a number of ways to address this. The most obvious is to give sales people the training and coaching needed to negotiate effectively. But it’s not always one size fits all. You need management information to determine which sales people will benefit from different types of training”.

How to measure discounts given using salesforce

To do this create several fields on the Opportunity that calculate the total discount in percentage and value. Nick demonstrates this in the video in Tip 1. Then use reports and dashboard charts in salesforce to track discounts by team and user. Also think about using volume based pricing within salesforce to manage and control discounts offered to customers.

Tip 10. Conduct qualitative research

It’s common to find a ‘Reasons Lost’ field on the Opportunity in salesforce. There’s typically a validation rule that ensures sales people complete the field when the Opportunity Stage is set to Lost.

“How often do you see anything other than ‘Price’ set as the reason that a deal is lost?” asks Tony. “Hardly ever. Yet is this always the real reason? I very much doubt it.

Of course price can be a factor in losing deals. But it’s important to get to the bottom of the other reasons as well. Win-rate measurement gives you the quantitative metrics on how well you are doing. But undertake qualitative research to get to the underlying reasons for success or failure”.

How to capture qualitative research in salesforce

Many of our customers use a custom object called ‘Lessons Learned’ and associate this with the opportunity.

An internal review is conducted whenever a large deal is won or lost and the key findings captured in the Lessons Learned object.

This is sometimes supplemented with customer interviews carried out by an independent third party. As Tony explains, that’s a way to get powerful insights that would not be available through internal discussions alone.

Tony Hodgson, 10 tips on effective approval process.

About Tony Hodgson

Tony is the Managing Director for Pricing Solutions Ltd UK. PSL is an international pricing strategy consultancy dedicated to helping clients achieve World Class Pricing competency. Their international team of senior pricing consultants is committed to providing clients with the tools and support they need to make pricing decisions that improve the bottom line.

As Managing Director he has worked with leading organisations across a wide array of sectors, including manufacturing, pharmaceuticals, medical devices, food services, digital publishers, tourist attractions and many more. No matter what the sector, the common currency is an understanding of all aspects of pricing.

If you are interesting in exploring pricing improvements at your company please connect with Tony or contact him directly to initiate a discussion. More details can be found at www.pricingsolutions.com

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How ILX Boosts Salesforce Effectiveness With Opportunity Products [VIDEO]

How ILX Boosts Salesforce Effectiveness With Opportunity Products [VIDEO]

There’s a single reason why you should watch this case study video.

Adding Products to Opportunities has massive business benefits. And you might be missing out on those benefits.

Watch the video to see how the ILX Group achieves competitive advantage by:

  • Increasing pipeline forecasting accuracy.
  • Streamlines business processes.
  • Improves customer service.

And that’s just for starters. In fact it’s surprising the benefits ILX generate by using salesforce Products effectively.

After you’ve watched the video try some of these other blog posts to learn more about how to implement salesforce products.

Related Blog Posts

Why You Need To Compare Average Closed Won Opportunity Size

How to use opportunity conversion reports for superior results

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5 Easy Tips That Will Make Opportunity Probability Your Trusted Friend