Salesforce has become one of the fastest growing enterprise technology companies based largely on the strength of their core CRM solution. Companies are replacing their legacy CRM systems in droves for many reasons including improving sales effectiveness and better servicing customers. But, one of the biggest reasons for replacing legacy systems with Salesforce is to drive better CRM adoption and therefore get better visibility into the pipeline. Accurately forecasting not just pipeline and bookings, but revenue and profit is increasingly important in today’s volatile business environment.
Systems like Salesforce have a significant advantage over legacy systems when it comes to forecasting. Salesforce is easy-to-use, has great mobile capabilities, and even provides social collaboration with Chatter. This means that reps have many more reasons to use Salesforce than traditional CRM systems. We find that Salesforce adoption is orders of magnitude higher than with traditional CRM systems. But, sales rep adoption is only part of the puzzle when it comes to accurate forecasting.
Step 1: Define the Terms
The foundation for any successful CRM deployment and a critical prerequisite for accurate forecasts is a well-defined and well-understood sales process. This starts with defining the elements of the forecast including terms like:
- Pipeline: Opportunities by stage and total bookings or revenue based on probability
- Activity: New Opportunities, Biggest Wins, Stalled Opportunities, Average Stage Duration, etc.
- Forecast: “Where will we (or I) finish this month/quarter/year”
- Schedule: Line Item detail describing the flight date and all incremental installments
We’re always amazed by the variety of ways that customers define these common terms. Often times, even from department to department, the definitions will vary. So, start by getting a consistent understanding of these terms.
Step 2: Clarify and Communicate Your Sales Stages
The next foundational step is defining the sales stages and articulating what it takes to get from one stage to the next. For example, at Appirio, our stages are prospecting, qualification, proposal, contracts, closing and won/lost. Each stage has a probability (adjustable by sales) and a clearly defined set of exit criteria and system artifacts. Defining your sales stages to reflect your process and clearly communicating your sales process to each sales rep is critical to getting to an accurate forecast. Unless all reps and sales management are speaking the same language, you might as well not invest in a shiny new CRM system. This means not only defining the stages but training each rep during on-boarding and even building contextual help in CRM to reinforce the stages. For example, we’ve helped companies build checklists or validation into Salesforce to ensure that exit criteria are met before an opportunity can be advanced to the next stage. As with all aspects of CRM, it’s always a balance between what you want to enforce through the system vs through incentives and other means.
Step 3: Make Sure CRM is THE Only Source for the Forecast
Once the foundational elements are in place, it’s all about driving and modeling the right behaviors. For example, It’s critical to run forecast calls and sales meetings using CRM. Resorting to spreadsheets and other tools for these meetings will just weaken CRM adoption so it’s critical to make the CRM system the source of truth for forecasts. In many cases, this may mean adding manual adjustments for probabilities or opportunity amounts because forecasting is just as much an art as it is a science. With Chatter, Salesforce provides an easy way to have discussions about these adjustments right in the context of the opportunity. For example, rather than send a rep an email about a probability that’s outside the regular range, a sales manager or executive can ask for the rationale right on the opportunity. This reinforces the system as the source for opportunity information and maintains the context for other executives who may look at the opportunity.
Step 4: Go Beyond Pipeline and Bookings
With well-defined terms, a clear sales process and consistent usage of the system, you should be in a position to deliver a solid pipeline and bookings forecast. But pipeline and bookings are only part of the picture. The next stage is tying these forecasts into revenue and demand planning. The more integrated CRM is to the revenue system, the more complete the picture is that you can paint. Many companies can get this picture via a Business Intelligence (BI) solution, however, if you can get this level of visibility into the hands of the reps and their immediate managers, they are then able to collaborate on opportunities that affect the forecast, and do so with a concrete understanding of how their actions will affect the outcome. This is when forecasting becomes truly collaborative.
Ultimately, the goal is to get to a forecasting process that enables you to do the following:
- Accurately forecast bookings, revenue, and profit for not just this quarter but next quarter
- Provide leaderboards that show pipeline, best case, and closed-won status
- Trackback actuals to orders and bookings by integrating order management and invoicing with CRM
- Use sales forecasts to drive demand planning and forecasting
Tom Saracene is a CRM Strategy Practice Lead at Appirio and has a two-decade track record of completing successful CRM & ERP implementations on a variety of client/server and hosted platforms across a wide variety of business processes. Most significantly dedicated to Cloud Computing and helping business move their processes and infrastructure into the Cloud with the help of platforms such as salesforce.com, Workday, Google Apps and others.