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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.

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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

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Your sales forecast is probably wrong (but here’s what you can do about it)

Your sales forecast is probably wrong (but here’s what you can do about it)

Track Sales Performance And Pipeline Versus Target

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It’s tough to create accurate sales forecasts.

Gut feel just won’t cut it. Nor will a top-down percentage applied across all opportunities.

And often your forecast contains deals that get continually shifted to the next month at the last minute.

It’s no wonder most sales forecasts are inaccurate.

But it doesn’t need to be this way. And that’s why Derek Davis of Gilbarco Veeder Root and I ran a webinar about it.

The live version was attended by 86 people from 12 countries. This 10 minute edited-highlights version distils the essential information.

So listen to Derek and myself as we discuss:

  • How a single dashboard chart can double forecasting accuracy.
  • How to spot poor quality deals that have no chance of closing this month.
  • How to set realistic probabilities on opportunities.
  • How to compare your sales forecast with revenue targets.

 

Other blog posts by The Gary Smith Partnership on sales forecasting, pipeline visibility and salesforce dashboards include:

12 Must Have Charts For Your Salesforce Dashboard

Download the FREE eBook today from our website

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Related Blog Posts

Why You Need To Compare Average Closed Won Opportunity Size

How to use opportunity conversion reports for superior results

How To Stop ‘Closed Lost’ Screwing Up Salesforce Dashboards

5 Easy Tips That Will Make Opportunity Probability Your Trusted Friend

Is Your Sales Funnel Big Enough to Reach Your Revenue Target?

Is Your Sales Funnel Big Enough to Reach Your Revenue Target?

Many managers that use salesforce are still not gaining the insight they expected about the sales funnel and their revenue goals.

Sure, they’ve got salesforce dashboards set up. These give visibility of the sales funnel and sales performance. But its still a challenge to create a robust sales forecast. And they can’t use salesforce to give a definitive answer to that most fundamental of questions.

Is my sales funnel big enough to make my revenue target?

But it’s worse than that. Knowing you’ve enough sales funnel to make your target for this month is one thing. But what if it only contains early-stage Opportunities? Deals that may take two or three months to close. How confident can you be then of achieving this months’ target?

Fortunately there’s a sure-fire way to use salesforce.com to know whether you’ve enough sales funnel of the right type to meet your revenue target. Not just the target for this month. The quarter’s sales target too. Indeed, businesses that have configured salesforce in the way we describe here, can get a clear picture of how likely they are to achieve the full year’s target. Here’s how it works. And when you’re done watch the accompanying video.

Monthly Sales Target

First you need a new custom object and a new tab. Let’s call it Monthly Sales Target, although it doesn’t really matter how it’s named. If Monthly Sales Quota, Revenue Objective or Monthly Sales Forecast make more sense in your business, that’s fine.

The Monthly Sales Target is where the sales target per person, per month, will be stored. There’ll be a record in salesforce for each sales person for every month of the year. If you track performance against target quarterly, rather than monthly, that’s fine. There’s simply going to be four records per sales person per year, rather than 12.

The ‘Month’ and ‘Year’ fields on the Monthly Sales Target tell us the time period to which the target relates.

Here’s the most important field, Sales Target. This is the target or quota for the sales person for that month. Every month may have the same Sales Target figure, or they may vary to reflect seasonal trends. It’s up to you.

Compare Sales Funnel to Monthly Sales Target

So how do you know whether you’ve enough sales funnel to meet the Sales Target figure?

You need some code that automatically links each Opportunity to the relevant Monthly Sales Target. You can either build the code yourself or you can have us implement it for you. If we do it, reckon on around 5 days of work including the configuration, reports and dashboards.

Here’s what the code does. It looks at the Opportunity Owner and the Opportunity Close Date. Then it links the Opportunity to the Monthly Sales Target that matches the Owner and the From / To dates.

Link the sales funnel Opportunity to the Monthly Sales Target

If the Close Date subsequently changes, then the code ‘unhooks’ the Opportunity from that particular Monthly Sales Target and links it to a new one.

12 Must Have Charts For Your Salesforce Dashboard

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Sales Funnel Metrics

Next, the code ‘rolls-up’ the value of all Opportunities to the Monthly Sales Target.

Metrics that show whether the sales funnel is big enough to meet the revenue target

Now you get some critical metrics on the Monthly Sales Target to help you understand whether you’ve enough sales funnel to meet your revenue target. These include:

  • Won Amount. The value of all Opportunities that have an Opportunity Stage of Closed Won.
  • Funnel Amount. The value of all Opportunities in the sales funnel.
  • Weighted Sales Funnel. The value of all Opportunities in the sales funnel, based on the Expected Amount (the Opportunity Amount multiplied by the Probability).
  • Expected Revenue. The value of Closed Won Opportunities plus the Weighted Sales Funnel.

This last one is the killer metric. It’s the figure that shows whether this sales person has enough sales funnel, combined with the business they’ve already closed, to meet their sales target. In our example above, the month target is £30,000, but the Expected Revenue is just under £25,000. We don’t have enough! This is emphasised in the percentage comparison figures on the right, and the embedded chart showing a shortfall.

But there’s more to it than that. Look at the chart to the right of the salesforce page. It provides more detail on the sales funnel Opportunities associated with this Monthly Sales Target record.

Let’s say you look at the Monthly Sales Target for the current month. If your deals typically run through a 90-day sales cycle, then you don’t want to see very much in the Prospecting Stage. The likelihood is that these deals aren’t going to close in the current month. Alternatively, if it’s the Monthly Sales Target for three months’ time, then sure, lots of early-stage funnel Opportunities are a good thing.

Sales Funnel Dashboard

But what about the company or team-level sales target. Is the sales funnel big enough to meet those targets? The dashboard chart and underlying report give us that information. And using the Expected Revenue, the reports give us a robust sales forecast, one that will stand up to detailed scrutiny.

sales funnel on salesforce dashboard

Of course none of this replaces the need for proper sales funnel management. The Opportunity Probability still needs to be reliable in each case. But it does give the sales manager the tools necessary for effective sales funnel management. This is especially the case if the Monthly Sales Target reports are used in conjunction with other salesforce dashboards and reports that identify the poor quality deals that over-inflate your sales funnel. Weed out the lame ducks that give a false sense of future revenue!

Let us know if you’d like our help to know whether the sales funnel in your organisation is big enough to meet your sales target.

Watch Gary demonstrate the salesforce funnel management solution described in this blog in this video.

Track Sales Performance And Pipeline Versus Target

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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