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2010/10/14

Close rate, forecasting and velocity reporting

NetSuite is a great Sales Forecasting tool. Using the status field, it calculates the weighted value of your opportunities. With this data, it is possible to estimate the dollar value of expected sales in a given period.

The tricky part is in approximating the probability of success associated with each status.

Luckily, we had historical data saved in our NetSuite instance going back to 2005. We simply repeated a process to determine the historical success rate of every lead in the last two years.

To get this data, create a custom report to extract the status of the opportunity before it was changed to lost. (old value = closed-lost). Along with the total number of opportunities won, we now have the number of lost opportunities necessary to properly calculate the probability per status.



We did not expect the new result to match the standard probability that was set two years ago. Since then, we have added another list field on our opportunity records to track the services in question.

After a modification to the previous report, we now have the probability of closing a given opportunity per service.

Putting it in action
With the help of some easy scripts, our opportunity now shows the right probability based on status and service. This greatly increases the accuracy of our monthly reports.

Now that we have our close rate:

  • How long does it take to close a deal? (from lead to closed-won)
  • How long does it take for a lead to convert to a Prospect?
  • How long does it take for a Prospect to convert to a Closed-Won deal?

Let’s take it to the next level. What should my funnel look like in one, two or three months? I can guess the close date of my opportunities, but what are the real historical stats?

Assuming my marketing team continues to provide me with the forecasted quantity and quality of leads, and I know my close rate, how do I forecast when the deals will close?

My sales team can give me an educated guess on how long it takes to convert a lead to closed-won or prospect, as well as how long it takes to convert a prospect to closed-won. Typically, they will be making an educated guess based on experience. New representatives have a tendency to give more aggressive numbers, whereas more experienced reps will sand bag it and give you longer time lines.

I wanted and needed the real data to show me the numbers so I could build a more accurate revenue forecast. This information can also be used to coach my sales team or alert me to deals that are at risk as they are running too long.

Once again, we had the data in NetSuite so we just had to create a set of saved searches to show the real data.

Reports indicating the length of time for a deal to move from stage to stage until closed are commonly referred to as sales velocity reports.

I know this post was a bit complicated, but I wanted, at the very least, to introduce readers to the possibility of velocity reports and to show that they are do-able in NetSuite. Sometime soon, we will likely have a training webinar on this.

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