Schedule Revenue Over Time In Salesforce
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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.
However, 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.
- Regular Order.
- Occasional Order.
- 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
This means 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 however, 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, pricing, commercial arrangements and legal terms of the contract.
However, the petrol retailer does not want to receive all the pumps in one go.
Consequently, there may be a written minimum and maximum order quantity each month. However, progress on their gas station re-fit program 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. Consequently, 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.
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.
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.
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.
Automatically Move Product Schedules On Close Date Change
Interested in this app? Get in touch with us 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.
Use our custom revenue schedule app for this more advanced type scheduling and revenue tracking.
2. Manage Regular Order Framework Agreements in Salesforce
‘Regular order’ framework agreements in salesforce also need an opportunity.
However, 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.
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
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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.
However, be sure 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.
Four 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. Follow the advice above – or – for a free 30 minute free consultation on managing framework agreeents in salesforce, follow the link below.
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