CRM is a powerful tool for managing sales in general. And revenue forecasting and quota tracking are tasks of a specific importance in managing sales. This blog post discusses the relation of a proper opportunity management and a revenue forecasting.
Sales forecasts are vital part of the sales management. They are needed for various management tasks, such as the evaluation of market opportunities, company size planning, to short term cash-flow estimates, sales quota tracking and many others. CRM reports will help you significantly especially with short term revenue forecasting and sales quota tracking. The magic key in crm that will do most of the job is called the
opportunity.
All you need to start revenue forecasting in your crm is to start using opportunities (properly). The very first questions might be: "What is an opportunity?, "How should I use them?", "What information shall I collect and evaluate?" Answering these questions is essentially the starting point of an implementation of crm opportunities into your organization.
What is an opportunity.
For the sake of revenue forecasting and quota management an opportunity can be defined as follows:
an opportunity is anything in your sales process that can be closed and that you can gain revenue from it. This is a very important moment to realize that whatever you sell (even recurring service) you can set up your sales process methodology to define discrete elements of your sales process having attributes “closed or lost” and “revenue”. Sales opportunity management will be about managing that part of your sales process.
How to work with opportunities.
Well, having opportunity defined for your sales process opens a whole bunch of questions will arise about how to use them. When create an opportunity, when update what information, when is the opportunity closed or lost, etc. You need to set up rules for using opportunities that everyone must follow in your team. Be especially aware of the following common pitfalls of an opportunity management:
- Back and forward moving opportunities. Try to avoid opportunities that slip back and forward or lagging opportunities.
- Poorly qualified opportunities. Try to exclude opportunities that are not certain enough or that are not likely to be closed in a required forecasted time range.
- Inaccurate information. Try to avoid situation when your opportunities will have out dated wrong information.
What information should be collected for revenue forecast and quota tracking?
There are dozens pieces of information about opportunities that can be collected. But even few pieces of information are enough for the most of your reporting needs. The examples given below are the corner stones for sales forecasting.
- Expected revenue. Keep the revenue volume up to date.
- Opportunity sales phase. Keep the information where is the opportunity in your sales process.
- Expected closure date. Record the date when the opportunity will be closed or has been closed or lost.
- Probability. Set your standard opportunity close probability for each sales phase. Let sales put their own estimates.
Proposed opportunity implementation guidelines are as follows:
- Collect only the information you need.
- Set the rules for information update every time the opportunity changes its sales phase.
- Set the rules to keep closed or lost opportunities information 100% correct.
- Expected close date shall notbe updated until the opportunity close happens.
- Lagging (or moving) opportunities shall be immediately closed and open as leads.
- Be strict about uncertain opportunities; do not let them to move to later sales phases and keep probability very low – to avoid forecast deviations.
The implementation of opportunities into your sales management brings many additional benefits. For example you can increase your management insight by attaching product, channel and sales person to an opportunity or you can organize your communication by opportunities and make crm more effective tool for your communication with customers. Opportunities are simply a great crm tool.
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