Handling Multi-Year Deals

  • 10 March 2023
  • 1 reply

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Does your organization sell multi-year opportunities? Maybe you are starting to think about mutli-year deals for your organization? Wherever you are in your journey around this topic, let’s discuss some considerations around the management of these deals, ownership, and how to think about forecasting.

Here are a few questions to consider:

  1. How does quota retire for multi-year deals? Does quota only retire in year 1 or does it retire over the course of each year?

  2. Do users need to forecast each year of the multi-year deal or just year 1? If they have to forecast out-years, there should be a consideration for if a user leaves the organization and how those opportunities will be handled.

  3. How will these mult-year deals be tracked in Salesforce? Are they tracked by individual opportunities (one created for each year) or is there a separate object used (subscription, schedule, product line, etc.)?

All of the above considerations are important to consider so your organization can setup Salesforce and Clari in the best way to handle these types of deals.

Additional thoughts on multi-year deals based on the questions above:

  • Focus on ARR/ACV -  If you are retiring quota only for the year the deal is booked, you can go off of the ACV/ARR for the opportunity since that will only include the value for the year based on the Close Date. In this scenario, it’s best to refrain from using something like the TCV since this would include all years.

  • Weighting of ARR/ACV - If you are retiring quota of the course of each year, consider retiring quota for the year 1 value and weight that value based on the total TCV. For example, you might want to consider retiring quota for the entire value of year one and then add in a percentage of what is to close in out-years. This could be captured in a separate field or in a separate opportunity.

  • Leverage Sub-Objects/Custom Objects - If you want to retire the quota over the course of each year, you will need to make sure you have a way to identify what the value is year-over-year. In this case, you might want to consider separate opportunities for each year or using a sub-object like product lines, schedules, etc. to determine the revenue in our years and when it will be recognized.

  • Revenue Recognition vs. Quota Retirement vs. Bookings - All three of these components you might want to consider focusing on separately. In Clari, we can have separate tabs in Forecasting to look at each depending on how you want to piece apart the business. It’s important to take into consideration how Salesforce is set up to make sure these can be split apart. From a forecasting perspective, you might want to focus on a bookings forecast when it comes to multi-year.

  • Team Departures & Movement - As users leave the company and movement happens between teams, you will want to consider how this impacts how multi-year deals are forecasted. This is especially important if you are having the business forecast each year of an opportunity versus looking at it from a revenue recognition/quota retirement perspective.

How does your organization handle multi-year deals? Feel free to comment below with our thoughts, ideas, or questions that you might have!


1 reply

Userlevel 5
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@Chris Finnerty this might be helpful for what Bobbi-Jo was looking at.