Identify your business challenges
When you are to create a business case for your investment you need to analyse your current situation. Generally you should go through the following two steps:
* List the most important business challenges you have (areas you need to improve)
* For each area list the reasons you need to improve (e.g. you may be renewing only 70% of annual renewable contracts while you sell 20% new contracts - obviously with that situation you have to improve to avoid going out of business)
An example of a business challenge could be:
'We are getting enough leads to our sales people and they follow up with enough quotes to sell 5 times more than what we currently manage to sell. Our challenge is to convert the proposals into sales.'
The question you then have to ask yourself is - "Why do we have these problems"
Let us assume that two answers are:
* We do not follow up on all proposals in a timely manner. Sometimes we have more than four weeks before we call back and we assume that some are not followed up at all
* The quality of the proposals differ as it is sometimes not enough time to write it nor to have it checked by another member of the sales team. Copying of old proposals makes it fast to write but can have errors in names, addresses and other details specific to the previous customer
Document the reasons for your challenges and what impact it has on your business
The next you need to do is to take each of the reasons you have problems and look at the effect it may have on your business. Sometimes this can be difficult but it normally helps to go back to measure success and then say the problem rests with those that do not give you success. As for the late follow up make a measure over a period of time of how many of the closed deals was followed up quickly, e.g. within a week. Let us assume that is 50% and it account for all your sales, while you only convert 20% of the total proposals into orders. Then look at those that are lost and see how many you could have done different. If a common problem is incorrect information and you find errors in two of ten proposals among the lost opportunities while it is one out of twenty for won opportunities it would be correct to say that errors means it is four times more likely to have a proposal rejected when there are errors in them.
Describe the ideal situation
The third step is to find out how you would like things to be. You could say "If I had this then I would achieve that". If for the follow up of a proposal would be possible to have a list of all proposals in one place such that the sales person could easily find the most important next task to do and management could see if any internal or other activity could wait to empty the follow up of proposals process was completed it would improve the sales conversion.
Estimation of lost business and potentially won business
The next you have to do is to guess how much it could be and then bring some conservative estimates into this based on what the provider of your new business solution - CRM System - can show you with the new system. Make your own guess and then bring your estimated achievement down a bit.
For the example above you now know a few important things:
* 20% of proposals become orders
* 40% is followed up within a week
* 5% of the proposals, which are orders you win, have errors in them
* 20% of the proposals, which are orders you loose, have errors in them
If it is likely the new system can give you the ability to follow up 80% of proposals within a week and that it also support document templates in such a way you can get down from 25% errors on the total to 5% the following assumptions would seem fair:
The number of sales would double! If you manage to maintain the same closing ratio. Let us assume that for some that may not be true and aim for 50% improvement. That should be a realistic target.
In addition there would be some additional sales due to better quality of the proposal, but it is harder to measure. Given that twice as many are followed up on time and it is possible to close four times more deals it should be possible to improve the closing ratio also by this element. Let us decide to ignore this, again to be realistic about our achievements.
A fair question then would be "What is your average deal size and number of deals per month?". If that is 2,000 (whatever currency) and 100 deals you should be aiming at improving the business with 100,000 in top line sales with a margin of 50%.
The estimate for the business challenge you are currently looking at can now be compared with the implementation cost and running cost through the time you believe it will take to get up to full speed on the new solution. By comparing the two figures you should be able to get the time it would take until a positive return on investment has been achieved.
The investment in software and implementation services for the solution above was 150,000 with a cost of 10,000 per month. One month is the estimated time to bring the team up to speed. The initial cost is then 160,000 and you will now start to improve the business by 50,000 per month. Four months later you will then break even at 200,000 in investments and running costs against 200,000 in improved performance. Thereafter you will make 40,000 more in profit per month.
Long term effect
A CRM system need to cope both with the initial challenge and have the capabilities to continue to make business improvements also in the future. If its scope stops with the initial implementation it may be very costly to change to something that can bring your business to the next level in the following improvement steps. And if you want to run a healthy business only one thing is certain - There is never an end to the need for improvements!
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