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4 Types Of Framework Agreement You Can Manage In Salesforce

4 Types Of Framework Agreement You Can Manage 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, get a framework agreement in place.

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

Yet companies often struggle to do this.

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

He wasn’t wrong.

They created recurring opportunities for each month. They used these to anticipate ongoing revenue. Unfortunately, this meant they had opportunities coming out of their ears; but no visibility of the true pipeline or forecast revenue.

As we’ll see, there are better ways.

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


Types of Framework Agreement

First you have to decide what type of framework agreement you’re dealing with if you want to manage it successfully in Salesforce.

Here are four types of framework agreement you can manage in Salesforce:

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


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. However, in practice the actual order quantity often varies from month to month.

Drawdown framework agreements are common in many industries.

For example, Gilbarco Veeder Root is based in Greensboro, NC. The company agrees drawdown framework agreements with petrol retailers to sell large quantities 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. That’s often because the retailer wants to receive the pumps in line with a gas station re-fit program.

Consequently, there may be a written minimum and maximum order quantity each month. However, the actual quantity ordered each month depends of the progress on the re-fit program.


2. Regular Order Framework Agreements

Companies that sell a large volume of relatively small-ticket items or consumables often use regular order 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, take Zimmer Biomet in the UK and US. They sell a variety of consumable products to dental practices.

Zimmer Biomet enters into a regular order framework agreement with the dental practice.

This agreement specifies the price for each product based on the anticipated volume. It also describes the training support, marketing and other services provided by Zimmer Biomet.

The dental practice places orders every few weeks using the Zimmer Biomet ERP portal. This means the end-to-end process for packing, shipping and invoicing each order is streamlined.

Each year, the framework agreements are reviewed and actual orders compared to the anticipated volume. Potentially this results in changes to pricing within the agreement.


3. Occasional Order Framework Agreements

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

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.

For example, 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 major undertaking. However, often these laboratories are with large pharmaceutical or government departments with whom Evolve regularly work.

A framework agreement is set up with the organization. This agreement defines the pricing and other terms that apply to each new laboratory within the framework agreement.

Of course, 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.

Here’s another example.

At GSP we use this type of framework agreement to do Salesforce benefit-enhancement work for many of our customers.

This means we have pre-agreed the commercial arrangements. We then define the specific scope of each project within the context of the agreement.

Get in touch if you’d like to discuss how we can work that way with your business.


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 common in financial services and many other industries.

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

First, within a large multi-branch brokerages.

The head office of the brokerage makes framework agreements with selected providers in each market category. If Hornbuckle Mitchell is selected as one of these providers, they have permission to visit the branches and convince individual brokers to use their products.

Second, Hornbuckle Mitchell makes framework agreements with buying groups.

For example, these buying groups often make framework agreements on behalf of many small brokers.

The agreements cover fees, training, regulatory services and commission. The license to hunt gives Hornbuckle Mitchell permission to visit the members of the buying group to promote and sell their financial products.


How To Manage Framework Agreements in Salesforce

Very often with framework agreements no money changes hands when the deal is done.

Rather, the revenue is realized over time.

So, bearing that in mind, here’s how to manage each of the four types of framework agreement in Salesforce.


1. Drawdown Framework Agreements In Salesforce

Here’s the key to managing drawdown framework agreements in Salesforce:

Products, combined with standard or custom schedules.

Here’s what I mean.

Create an Opportunity to represent the potential framework agreement. You can track the progress of the agreement using the standard Opportunity Stage field.

Add Products to the Opportunity to represent the physical goods and services you anticipate the customer will buy over the lifetime of the agreement.

By the way. You might want to consider using the GSP Product Selection Wizard to make it much easier for salespeople to add Products to Opportunities in Salesforce than the standard interface.

Create a revenue schedule for each Product on the Opportunity. This schedule describes how the products and services will be drawn-down over time.

Here’s an example.

Let’s assume the customer anticipates buying 60 generators over a 12-month period. To make the math easy, let’s assume each generator costs $1000.

The opportunity has a total value of $60,000. That’s the figure in the Amount field.

Add products to the Opportunity. The total value of the products is displayed in the Amount field (highlighted).

From gross sales perspective, the deal is worth $60,000.

However, as we know, that’s only half the story.

That’s because the sales revenue is going to come to us over time; not all at one go.


How to Forecast Revenue On Drawdown Agreements

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

Revenue schedules spread the anticipated income over time.

Using the GSP Product Schedules app, you can create this revenue forecast at the same time as adding the Product to the Opportunity.

In this example, we are defining the start date for the revenue and the number of months.

Use product schedules to describe how revenue will be spread over time in the framework agreement.

This means we now have a reliable view of the revenue over time.

Use revenue schedules to forecast sales on framework agreements.

As you can see, we’ve scheduled $5,000 of monthly revenue over 12 months.

However, you might be wondering:

What if the revenue forecast isn’t a straight line?

No problem. 

The app means you can adjust the revenue schedule month by month.

Adjust the framework agreement revenue schedule each month.

In other words, you’re fine-tuning the revenue forecast.

In summary, Products and Revenue Schedules are an excellent way to manage drawdown framework agreements in salesforce.

Schedule Revenue Over Time In Salesforce

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2. Manage Regular Order Framework Agreements in Salesforce

‘Regular order’ framework agreements in Salesforce also need an opportunity for each customer.

However, often this opportunity is created at the start of the year. It represents the total value of orders you anticipate from the customer over the year.

Nevertheless, as with the drawdown framework agreement, we need to schedule that revenue over time. So again, use the GSP Product Schedules app to do this. 

But this time let’s go a step further.

As the year progresses, we update the revenue schedules based on how the year is panning out. 

Update the forecast revenue within framework agreements.

This is vital information for account managers. 

It means we can compare the value of business we anticipated at the beginning of the year with latest expectations on actual revenue.

Needless to say, we can roll this up by company, territory and salesperson.

Roll this up the forecast revenue by company, territory and salesperson.

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

The team at Zimmer Biomet use this information to segment customers, drive business development activity and implement marketing campaigns.

They also measure account management performance based on the quantity and value of orders placed by the customer.

Here’s one more thing they do:

This relates to discount approval on the regular order framework agreement.

All information about the rationale for any discount is stored in the Chatter feed. In other words, directly on the Opportunity. This means it is easily available in the future. You don’t have to search high and low for the email trail.

The reason is this:

The promise of future orders may justify a discount. However, the customer may fall short.

At the very least, you need to know this when it comes to re-negotiating the framework agreement. Storing the rationale for the original discount in the Chatter feed keeps this important information visible and easy to find.

More tips on controlling price discounts using Salesforce.


3. Manage Occasional Order Framework Agreements in Salesforce

With these type of framework agreements you take a different approach. 

There are, however, some similarities with the regular order approach. That’s because you create an opportunity to manage the process of securing the framework agreement.

This opportunity has a notional value only. So make sure you filter it out of the main pipeline reports and dashboard charts.

So far, it’s similar to the way regular order framework agreements are managed in Salesforce.

However, 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.

That’s where opportunities come into it. Manage the sales process related to these projects 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.

For example, Agile Solutions in the UK has a small number of strategic customers. These represent 15% of these total customer base. Yet they account for 70% of revenue. 

Agile has agreed specific rates and prices with each of these customers. 

To make sure each opportunity has the correct price book, they use the GSP Auto Price Book Selector. This app makes sure the correct dedicated Price Book is used in every case.

Automatically Assign Price Books To Opportunities

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The GSP Auto Price Book Selector is an effective way to make sure salespeople consistently apply the right Price Book to Opportunities. You can download it for free from the AppExchange.


4. Manage License To Hunt Framework Agreements in Salesforce

This is similar to the way you manage occasional order agreements.

Use an opportunity to manage the sales process of getting the overall framework agreement secured. This opportunity has a notional value. It’s based on the 12 month or long-term anticipated value of related deals.

However, be sure to exclude these types of opportunity from your pipeline of ‘paying’ opportunities.

After the framework agreement is in place you create a separate opportunity in Salesforce for the Accounts you are working.

In other words, create a new opportunity for active prospects within the overall organization. You might want to use an Ultimate Parent function to get a complete view of all the Opportunities.

Ideally, 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 you can manage in Salesforce.

Unlike our prospect, don’t make a dog’s breakfast of it.

Need any help or more advice? Don’t hesitate to get in touch.

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

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

Schedule Revenue Over Time In Salesforce

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

Many result in multiple orders and payments over time.

But here are two common mistakes companies make in salesforce:

  • They do use repeat opportunities when they shouldn’t, and sometimes
  • They don’t use repeat opportunities when they should.

The result?

  • Your sales process is far more convoluted than necessary.
  • It’s difficult to get accurate pipeline visibility.
  • Key sales metrics that give visibility of the size, quality and trend in the pipeline are distorted.

So here are five situations in which you may think repeat opportunities have a role to play in salesforce.

In each of these commonly occurring scenarios, companies receive multiple payments over time. So are repeat opportunities the best way to handle each situation?

Here’s a simple way to answer this question:

Decide whether future revenue is in jeopardy.

If the answer is yes, then repeat opportunities are probably required.

However, if the answer is no, then you probably don’t need repeat opportunities.

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

Repeat opportunities with software as a service

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

Sidetrade delivers its platform on a SaaS basis. Customers sign-up for a fixed term contract for a number of years. Payment is on an annual basis.

Sidetrade doesn’t need recurring or repeat opportunities each year.

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

Therefore, instead of repeat opportunities, Sidetrade forecasts future revenue using Schedules.

For sure, Sidetrade will aim to sell additional services or upgrades to the customer.

However, Sidetrade handles this using additional opportunities. These are new opportunities for incremental revenue rather than repeat opportunities.

Repeat opportunities with insurance premiums

Based near Toronto, Aboriginal Insurance Services (AIS) sells 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 area.

The insurance and premium is always for one year of cover.

AIS will aim to renew the policy with the community. However, there’s no guarantee of this renewal.

In fact, future revenue is in considerable jeopardy. Each year, competitors will seek to undercut AIS or offer more product benefits.

Therefore, it’s right for AIS to create a repeat opportunity to manage the renewal. It is a separate sales process. AIS will apply proactive key account planning to optimize the chances of success.

There is, however, no certainty of a positive outcome.

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Repeat opportunities with service contracts

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

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

The customer pays an annual fee for the support.

However, MAM don’t use repeat opportunities.

That’s because the customer is contractually committed for the duration of the support arrangement. The revenue is secured. It’s not in jeopardy.

Instead, MAM has a single opportunity. Products with Schedules are used to forecast future revenue. This means MAM has an accurate, forward-looking view of secured revenue.

Repeat 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.

Modernis offers the analytics products in a software-as-a-service platform.

However, the sales process often involves two distinct stages.

First, Modernis provides chargeable proof-of-concept access to their platform. Later, once customers have experienced the value that the platform brings, Modernis sells 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 opportunity represents the sales process for the chargeable proof-of-concept.

A second opportunity is automatically created. This represents the sales process for the full contract.

So the company uses repeat opportunities – at least of a type. This is because commitment to the full contract is not a given.

Rather, 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 once the contract is signed, the revenue is not in jeopardy. Therefore, no repeat 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 often relates to a large 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 significant purchase from GVR.

One the one hand, a long-term contract benefits both parties.

On the other hand, the customer doesn’t want delivery of all the petrol pumps manufactured and delivered in one go!

Rather, they need 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. However, the month-on-month revenue is variable.

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. The GVR Account Manager updates the schedules each month with the actual orders.

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.

Implementation points to consider with repeat opportunities:

  • Consider triggering the repeat opportunity automatically. This avoids the subsequent opportunity being forgotten about. That trigger happens when the original opportunity is won or at some other predetermined point in the process.
  • Measure the win-loss ratio for the repeat opportunity separately to the initial opportunity.
  • Consider using 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. However, only use repeat opportunities when it is right to do so. And if it isn’t right, then try revenue schedules instead.

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