In two previous posts, I discussed the need for a bookings and a revenue forecast and how to create those two types of forecast. But sometimes the easiest way to learn about something is to hear how others are doing it.
So, here are a few real-life examples of companies driving their business on a bookings forecast and a revenue forecast.
Semi-conductor manufacturer: Design-wins and revenue forecasts
For many semi-conductor manufacturing companies, their sales cycles are long technical sales cycles that culminate when their chip is “designed in” to the end-solution. For example, a current Right90 customer and semi-conductor manufacturer competes heavily with other manufacturers to be the chip provided in mobile devices. This semi-conductor manufacturer “wins the design” and then can count on future revenue for some period of time to come. It tracks its design-wins in its CRM system and its forecast in Right90.
In their CRM, an opportunity represents a customer project, whereas a closed-win deal equals a design-win. The CRM system provides them with a design-win pipeline (or as we call it, a bookings forecast).
Through the Right90 CRM connector, sales reps also forecast the quantity and price of those chips for the project out into the future (units and price in each month for the length of the contract). In fact, the quantity of each chip does change over the course of the contract, which is why sales reps review and update their forecast in Right90 every month. Right90 provides the organization with a “revenue forecast”on which the factory plans and builds the quantity of units required at each date.
It also provides finance with a revenue forecast they can trust. In fact, in April of 2008, the VP of Sales and VP of Finance looked at their revenue forecast and saw the downturn of Q3 2008 coming. They changed their business plans, avoided lay-offs and set their business appropriately for the business climate. Now, they are so good at tracking these two types of forecast, they can utilize their design-win pipeline in current quarter to help them validate against their revenue forecast two to three quarters into the future.
Services and software provider: planning the business on a complete forecast
A Right90 customer who provides data services, software and professional services to their customers is faced with the challenge of forecasting three different product lines that act like three unique businesses. While there are specific rules that can translate a “won deal” to a revenue forecast, these rules vary by product and contract within each product line. The company has chosen to utilize a combined solution of a CRM system (salesforce.com), a business rule and integration engine (Cast Iron), and a sales forecasting solution (Right90).
This company tracks its new opportunities in its CRM along with contract and product information. Their CRM is tied directly into Right90, where the company tracks the bookings forecast. It also feeds this information into the business rule engine where it is translated into a revenue forecast based on the contract and product rules. The revenue forecast is then stored in Right90.
With this configuration, the company has both the revenue and bookings forecast in Right90. When a booking forecast changes, it can instantly see the impact to the revenue forecast.
The finance organization stays informed on a weekly basis where revenue will be quarters out into the future. The sales team, which is compensated both on bookings and revenue, can get a clear understanding of their incentives and their future commission.
Hopefully, these examples can provide you with some ideas on how your organization can better drive your business on both a bookings and revenue forecast. If you’d like to see more about how Right90 can help your organization, make sure you watch our sales forecasting demo.
Tags: Best Practices, bookings forecast, forecast, forecasting, revenue forecasting, revenue performance management, Right90, sales analytics, sales forecasting, sales management, salesforce.com, spreadsheet forcasting