Dealing with big deals - multi-year framework agreements

[Edyta7510]

Hi All, 

I was wondering whether any of you have the same challenge or how you deal with it. 

For any NEW business type of deal in our case the buying process is very long and complex. In some cases a deal that starts at a lead/qualified lead stage can be a 3year framework agreement for XYZ mln $ (estimated value that evolves) although product line items/pricing/margin etc are only determined just before the agreement is signed. 

The challenge is how to report on these kind of deals in forecasts. Close date which can be this year (or next year), although revenue recognition will be split throughout 3 years to come. If I do not include any of it in this year's forecast (even weighted amount), I'm undervaluating my forecast. I cannot include full 3year agreement either. How to ensure more accurate reporting? Custom deal properties that would reflect estimated revenue per year if agreement is to be signed for 3 years in this case? 

Thanks much for any insights!

Edyta

[Dan1]

Hi @Edyta7510 , 

Nice to meet you, is your business a software company selling multi year deals? If the answer is yes then the recurring revenue fields in HubSpot may well help you from a forecasting standpoint. I know its a little left field as its not a yearly breakdown, but actually the monthly recurring revenue reporting could help. But only if your selling Software As A Service, so appreciate it won't work otherwise. 

If the answer is no you don't work for a software company, then I can ask some other HubSpot customers and see what they are doing. 

Kind Regards, 

Dan Currin 

Co-Founder 

OrgChartHub 

GeoMapper 

OrgChartHub & GeoMapper named in the Top 30 HubSpot Apps 

[Edyta7510]

Hi @Dan1 

Thanks for your response. (unfortunately), we're not in SaaS, so cannot use recurring revenue fields unfortunately (I explored that feature earlier). 

These multi-year deals may be a bundle of different products and their spread YoY is not linear either (ex. 100k revenue may be attributed to Year 2, 200k to Year 2, 500k to Year 3, and so on). 

What I had in mind was to break those big deals into a few separate ones, but it would only make sense after the Close Won stage. 

Still, you can imagine that a  50 or 100mln deal accounting for 3-year contract which is earlier in the pipeline may overestimate forecast numbers for the current year. 

Forecast is a forecast and I don't expect it to be 100% accurate, but want to stay as close to the real picture as possible... 

Thanks for any insights you may have!

Edyta

[PamCotton]

Hello @Edyta7510, happy Monday! 

I will add some top experts to share their thoughts @webdew, @Dan1 what would you recommend to @Edyta7510 matter?

Thank you,

Pam

[Edyta7510]

Hi @PamCotton Thanks much for bringing experts onto this thread. Looking forward to hearing your thoughts @webdew @Dan1 Thanks!!!