When first starting into business, most start-up companies aren’t really rating opportunities.
It seems that any opportunity is worthwhile. There are numerous reasons for this: The company needs the income. A new company needs the repute of having the increasing market share. The more customers you have, the more that can recommend your product or service.
Before very long, though, any company must start engaging in opportunity rating, from several different standpoints. If opportunities aren’t so rated, sales strategies have less likelihood of succeeding. Beyond that, the company may soon go out of business as they’re not focusing on deals which will actually make them money.
Opportunity rating and opportunity management give you the “reality edge” for your sales strategies. You have a much firmer grasp on which deals are likely to come in, which aren’t, how many you now have and how many you need.
Most companies at the least rate an opportunity on the difference between the cost of a product or service and the price being paid—that is, “profit margin.” The company will understandably tend to focus on deals which offer a higher profit margin.
There is a finer point that should be applied, however—and that is to establish a profitability threshold for sales. That threshold would be the point at which a deal—after all costs of manufacturing, delivery and service are calculated—actually becomes profitable.
Once a profitability threshold has been established, that is one factor that can be taken into account in the opportunity rating: by what percentage is that deal under the profitability threshold? The goal of all of sales strategies is to make a profit for the company, and accurately rating profitability is the key.
#2: Future Business
Another factor that should be taken into account in opportunity rating is: what is the potential of future business from this target company? If there is a high probability of considerable business beyond this single sale, that could mitigate a tight margin on the profitability threshold. In other words, you might be willing to take less of a profit on one sale with the prospect if many more sales from the same source are indicated up the line.
#3: Value in Market Strategy
If your sale is to a large, reputable company, it could considerably boost the credibility of your product or service. That should always be taken into account in opportunity rating—especially if your customer gives you permission to use their name publicly.
Market strategy isn’t always figured into sales strategies, and for the future of your company and its products or services, it should be.
#4: Likelihood of Closing
Something that will rate a deal high or low is its likelihood of closing. If a rep has a strong customer relationship with a company and that company already trusts your products and services, the chances of the sale closing are very promising. On the other hand, if the target company has never done business with you before, and has previously been working with a competitor, you will definitely have some work involved in closing that sale.
The closing ratio of the salesperson on that sale will also figure into this likelihood.
#5: Risk Evaluation
Yet another facet of opportunity evaluation is that of risks involved in the sale. Of course, there is always the risk of the sale actually not closing at all—but this is a finer examination of potential risk.
Is your company going to be able to deliver the product or service, as it has been promised to the target company? If so, will delivery or installation be within the promised timeframe?
This element of risk should be examined to its extreme: what are the chances your solution won’t be a hit at your prospect company? Is there a chance that your target company can do something to cause your solution to failing in such a way that it will reflect badly on your company?
Nobody likes to ask or answer such questions. But again, it’s part of the “reality edge” you need to truly evaluate opportunities.
Another risk factor to take into account in your sales strategy is that of the ever-looming competition. What are the chances of a competitor coming in with a comparable solution, perhaps at a cheaper price? What measures are you taking or have you taken that will exclude competition and raise your chances of beating them?
Opportunity Rating in CRM Solution
A leading-edge CRM solution allows for a customized rating of opportunities for your particular line of business and product—including all of the factors which make an opportunity worthwhile. With such ratings in place, all potential deals can be prioritized, allowing the sales force and sales management to focus first on opportunities of the highest rating.
Such ratings also make sales forecasting more accurate. There can be many deals in a pipeline with a decent dollar value—but without a full rating system, you don’t know the real chances of their closing.
Fully put opportunity rating to work—and give your sales strategies the real edge.
Find out more about rating opportunities within CRM. Sign up for a free webinar.