Opportunity management is one of your top priorities as a sales leader. Successful opportunity management enables your organization to accurately forecast new business, which leads to effective budgeting.
But do you really know how to identify a good opportunity and how to work it?
Let’s take a step back. Everyone must speak a common language for describing the status of an opportunity. This includes where an opportunity is in the pipeline, and when it will close.
Opportunity Management: Tracking & Forecasting Opportunities
There are several ways to manage and track a sales opportunity.
Some sales organizations use “percent-to-close” to forecast the likelihood that an opportunity will close. In many cases, the total value of a pipeline is based on adding up the value of every deal, multiplied by its percent-to-close likelihood. However, this can often lead to inaccurate forecasting.
For example, if a salesperson values an opportunity at $100,000, with a 70% likelihood to close, then he or she forecasts this opportunity at $70,000.
Another salesperson values an opportunity at $500,000, with a 90% likelihood, which forecasts this opportunity at $450,000. Therefore, the sum forecast for all opportunities in the pipeline in this example is $520,000.
But what if the bigger deal (the $500K deal) is closed and lost and the smaller deal (the $100K deal) is closed and won? The sales forecast would be off by $420,000.
For these and other reasons, I’m not a fan of percent-to-close for opportunity management. Especially if you leave it up to the salesperson to determine the percentage. I view opportunities as closing or not closing.
Also, saying an opportunity is 70% likely to close doesn’t tell me at what stage the opportunity is in. Is it closing in the near or distant future?
This reminds me of a commonly used quote that states that everything in life can be boiled down to a 50/50 chance: it either happens, or it doesn’t.
Opportunity Management Using U.C.A.N.
I prefer to use a simple “U.C.A.N.” sales pipeline model in order to forecast sales results, which outlines the stages that opportunities move through on their way to a close.
Each letter in “U.C.A.N.” represents a stage of the opportunity. And, each stage is a rule that a salesperson should abide by, according to the sales criteria.
U – Unqualified
Opportunities at this stage are bona fide, but not qualified.
An opportunity enters this stage when it has been clearly identified, but not quantified.
For example: a prospect has spoken with your salesperson about a specific need and a sales call is scheduled. The main purpose for this call is to discuss the opportunity so the salesperson can get enough information to write a proposal.
C – Confirmed
These opportunities have been qualified and quantified via a proposal, quote, etc.
An opportunity moves into the “confirmed” category when the salesperson has sent a document to the prospect defining the specific deliverable and fee associated with the solution.
Your salesperson can now value the opportunity correctly because it’s the same amount as the fee defined in the proposal.
A – Advantage
This is the trickiest to quantify.
At this stage, you and/or your salesperson has processed enough information from the prospect to determine that there is an “advantage.”
For example: the prospect might have told your salesperson, “It looks like we’re leaning in favor of your company.” Another example is when the salesperson receives an email that their proposal is with Legal. This means there’s a high likelihood that this opportunity will be awarded to your company.
Opportunities at this stage are more likely to become closed/won than to become closed/lost.
N – Notified
You’ve received notification from the buyer that this opportunity is being awarded to you. This might be done verbally or via email. This is usually the last stage an opportunity is in before a contract, purchase order, etc. is received, making this opportunity closed/won.
Think of U.C.A.N. as “you can” close it. This will not only give you a more accurate pipeline forecast, but it will help you determine when the deals are coming in.
Although you might not track this in the pipeline, I recommend you also assign a “closed/won” or a “closed lost” status to an opportunity. This allows you to do analysis in the future on how deals were won or lost.
You can aggregate opportunities by stage, to forecast on a schedule. For instance, opportunities in the “unqualified” stage are likely to close within three months (if that’s your typical sales cycle). Those in a “confirmed” stage might close within one month. “Advantage” opportunities might close within the next two weeks, and those at “confirmed” might close in the next couple of days.
Train your salespeople to understand these stages and to keep track of typical sales cycles, so you can adjust your forecasting accordingly.
Opportunity Management with the Forecast Your Sales Results WorkSheet
Want to forecast your sales results quickly? We developed a great free WorkSheet!
Click here or on the image below to download a copy of your own. Next, use the Excel WorkSheet to manage your information. Once you and your team are comfortable, migrate the information to your in-house CRM. Your CRM will provide much more insight and better reporting than an Excel spreadsheet.
Let me know how this works out if you decide to give it a go.