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Quantifying the Return

Any project this size has to be justified with improvements to the bottom line. The two components of achieving this goal—lowering costs and increasing revenues—are hard to quantify. But they can at least be modeled to provide a credible SWAG.

Lowered Costs

To counterbalance all of the costs outlined previously, it’s important to identify areas of cost saving. Because SFDC is a salesforce automation system, you’d expect to find some. But that’s rarely the way it works—after all, many of the expense areas are sunk costs that cannot be recovered or labor that is taken for granted. You may have to be a good detective to ferret out the labor savings.

The first obvious place to look is cost avoidance for the system SFDC is replacing. It won’t be much, but at least it can be immediately quantified. Next, look at ancillary systems that can be decommissioned because SFDC makes them less relevant. For example, you may have a large number of spreadsheets for the marketing group with macros that won’t need to be maintained or extended any more.

The next place to look is wasted labor. Whether the waste takes the form of contractors or employees, the hourly rate should be quantified. The first waste-avoidance item will be system administration and maintenance for software and hardware that can be retired. This will probably amount to at least 32 hours per month; for large systems, it can be much more. Another source of wasted labor is sales administrators who—even in small companies—may spend 8 or more hours per week preparing the weekly forecast, and order operations people who spend 20 hours or more in order entry, correction, and reconciliation. Some business analysts also have to spend huge chunks of time trying to piece together spreadsheets from fragments of customer data. In addition, order fulfillment people (license generation, shipping, distribution, and expediting) may spend their entire day doing things that could be 80% automated. Finally, customer support people can easily waste 10 minutes per call trying to find data, correct erroneous entries, or fix problems that could have been avoided by automation. These areas of direct waste add up, as they occur every week and may become much larger in the closing weeks of the quarter. Even though employees’ time is a “sunk cost,” quantify the savings as if those workers were paid by the hour.

See Table 1-2 for an example cost-savings matrix for a small company (as always, visit the book’s Web site to find free downloads of Excel and other files that you can use on your project). Check out www.SFDC-secrets.com for other examples.

Table 1-2. Potential Cost Savings and Efficiency Improvements

Cost Savings



Hard Cost Savings

Ongoing license fees for existing SFA/CRM system



Support fees for existing SFA/CRM system



Hardware maintenance and support costs for SFA/CRM system

1 server


Auxiliary software products for existing SFA/CRM system

3 licenses


Potential Cost Savings/Efficiency Improvements

Tradeshow and related travel expenses reduced

1 tradeshow/year


Advertising and other marketing expenses reduced



Avoiding unproductive on-site sales calls/demonstrations

1 meeting/year


Avoiding low-probability “proof of concept” projects

1 POC/year


Improved product marketing and engineering decisions



Improved executive decisions

1 decision/year


Internal Labor Savings

System administration time for existing SFA/CRM software and hardware

16 hours/month


Sales administrator time reconciling orders

32 hours/month


Sales administrator time rolling up forecast

32 hours/month


VP time investigating/adjusting weird forecast numbers

12 hours/month


Missed Opportunities

Lower cost of customer acquisition by 5%

50 new customers/year


Prevent one lost sale*

1 new customer/year


Ability to do one more upsell*

1 upsell/year


Opportunity Costs

The larger cost savings are more difficult to quantify because they involve missed opportunities or avoidance of wrong decisions. What would it mean if the cost of customer acquisition were 5% lower? How would it lower costs if the sales cycle were a week shorter? What would be the impact of reducing sales representative turnover by just one rep per year? What percentage of marketing dollars is spent on marketing to the wrong people or participating in the wrong events? How much could be saved if you could quantify which marketing activities really produced revenue, rather than just “visibility”? How much travel expense and labor could be saved by avoiding just one unproductive tradeshow, sales call, or proof-of-concept project? If you knew more about which prospects were (or weren’t) going to yield the most profit, which other improvements could your company make?

Focus on quantifying external waste that could be reduced, rather than on internal jobs that could be eliminated, as the latter will bring the project nothing but political strife. You’ll need to interview people in sales, marketing, and pre-sales support to make this determination. Nevertheless, as you develop an effective model for estimating the cost savings, the amount saved can turn into big money.

There is also value to the risk reduction that SFDC will bring. Hits to customer reputation, knocks to brand value, and even Wall Street embarrassment all cost the company money—and all can be improved by a really solid SFA system. Avoiding just one unreliable forecast or a few irate customers can save enough to pay for the whole of SFDC. The problem, of course, is quantifying this value.

Increased Revenues

The flip side of lowering costs is increasing revenue. To develop credible estimates, it’s important to interview several sales and channel managers, discounting the opinions of people who are not directly responsible for revenues. It is political suicide to present your revenue conclusions without having first reviewed them with the Sales VP.

Develop a spreadsheet that shows the value of extra deals that could be closed with the aid of better prospect and customer information, better lead quality, tighter qualification, and higher conversion/win rates. What if a hot prospect never “fell through the cracks”? What would be the value of the extra deals you could do if the sales cycle were shorter? What kind of extra revenue might the channel produce if leads were handed off and managed more effectively? What would be the value of doing one additional “upsell” per year or of closing a deal with one more customer? What if your customer loyalty or retention rate increased by 10%? For the sake of credibility, keep the estimates conservative.

It’s also a good idea to identify opportunities to increase sales leverage—that is, getting more yield from the same cost structure. How would it change the company if a sales rep could manage twice as many deals without slip-ups? Or if a sales manager could manage 50% more sales reps? How would the company operations change if the forecast were really reliable in week 10 of the quarter? These issues could mean better scalability for the company and ability to respond to market changes more quickly. These speed and scalability advantages increase both the profitability and the value of the company.

Beware of politics surrounding revenue estimates. It’s tempting to say something like, “We could increase revenue 10% if only...” Sales executives may be very sensitive about this topic, and ornery finance executives might say, “We’ll approve this project if only the Sales department is willing to increase its quota by 10%.” To avoid this downhill spiral, focus your estimates on quantifying the increased probability of making the revenue targets the company already has. This approach is a less direct way of making the business case for SFDC, but it avoids the political traps and still makes the point.

Finally, beware of blatant double-counting of cost savings or revenue improvements. While some double-counting is almost unavoidable, if it’s too obvious it simply lowers your credibility (note that the example in Figure 1-4 on page 63 shows just “the right amount” of double-counting).

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