There are many variables to discussing closing ratios for a sales person and a sales team. The type of product or service being sold, the customers buying cycles and personality type. If you only have twenty customers vs. hundred or a thousand that makes a difference. Even though there are variables, there are common points that every salesperson and team should be monitoring to increase their success and have some fun while doing it.
Without a sales activity measurement system in place that consists of more than gross margin and sales volume, the ability to make improvements can many times escape even the best intentions.
How many people you talk to vs. how many you close is a key measurement in selling a product or service. Just like learning to shoot a free throw or how to stand in the batters box, it’s the basics of the profession. Time is an asset and must be used efficiently.
What Does This Tell You?
If a salesperson talks to 6 people a day x 5 days a week, that’s 30 contacts. How many of those do they sell? With a 20% closing ratio, they close 6. What happened to the other 24 contacts? To affect change, you have to look deeper into what the salesperson’s activities and behaviors are between the time they first met the customer until the sales order is signed. To only look at the end of the sales cycle is like jumping in a lake before checking to see if there is enough water in it.
Read my article titled, Relationship Selling- Steps to the Sale, because how the sale is processed can make a difference on how many deals are closed. Next, read Relationship Selling- How to Measure Sales Success in the area I talked about what makes up a quote. Please refer to that message because it is an important part of tracking sales. If you measure quotes by how many times you formally write one vs. every time you quote, I think you’re off track. Salespeople quote prices too many times when they need to be qualifying the customer’s interests.
Sold Ratio to Face-to-Face Contacts
The average closing ratio of 20% should be the very minimum standard of sales performance. There should be a focused effort to increase this number regardless of your sales environment.
In a business that has 50% or more repeat customers a 20% closing rate is terrible and should be carefully examined because you are losing customers. With measurement, you learn how “effective” the salesperson or the sales team is and in what areas.
If you measured 10 sales people and came up with the following scenario:
- 10 salespeople x 6 customers per day x 5 days per week = 300 customers.
- A 20% closing ratio would be 60 sold units.
- Let’s say your Average Gross Profit (AGP) per unit is $500.00. Our goal is to increase the closing ratio by 5%. That would be an increase of 15 Units.
- 15 Units x $500.00 (AGP) equals $7,500.00 of additional profit.
- What if you improved the closing ratio to 30%?
- What if you improved AGP by 2%?
- What if you improved the closing ratio by 5% and the AGP by 2%?
With just a little focus in the right areas, you can make more money and have more fun doing it. There are no shortcuts to sales success.
Process Improvement: Steps to Gaining More Efficiency in Closing Deals
To improve salespeople’s closing ratio involves coaching and counseling. Many times, ratio’s can be improved by helping them become aware of their selling habits. Just like every person does, after we do things for a while they become habit. It doesn’t mean it’s good for us. I also know that many sales people don’t have a dedicated sales manager who’s job it is to help them improve. A professional sales person takes it upon themselves to measure and improve.
For a Salesperson, you could ask yourself the following types of questions:
- Am I walking the customer through the sales process and fully engaging them in each step?
- Am I prematurely asking for the order or have I properly built value then asked for the order?
- In the past 5 customer experiences, how many of them was I successful in taking them through the entire steps to the sale and closing the deal? For those that I was not successful, why, what happened, what could I have done differently?
For a Sales Manager, you could be asking your salespeople the following types of questions:
- What step in the sales cycle are you in? They should be able to describe clearly where they are and why. If they can’t, they need some coaching.
- Since you’ve priced the customer, what are the top three reasons they want to buy that product and buy it from us? If they can’t tell you it’s because they have not asked during step #2 of the sales process.
- If the customer walked after you gave them a price, what were the customers reasons for leaving? Make sure you get what the customer said, not what the salesperson heard.
5 More Tips & Suggestions:
- An old time rule of sales is that you have to talk to a lot of people to make money in sales. The new rule to add to that is you want to be super effective with each interaction. Time is money. You don’t want to waste your time or your customers. Learn the sales process and use it as many times as you can so you can make more money in less time.
- Make sure to measure accurately your key behaviors. Measure it the same way for a period of time to properly access before deciding on an improvement plan.
- Businesses that log these customer contacts for each and every interaction outperform those that do not. You wouldn’t run your business without a financial statement. Tracking the key selling behaviors is a performance statement for the sales person or sales team that allows you to create improvement plans.
- Knowing the “steps to the sale” allows a salesperson to gauge where they are at in the sales process. By using the process you build the value of your product and your business by knowing when to insert key value added solutions that your business or product offers.
- It is very common for a customer to ask the first question when they meet a salesperson. That question can be “how much is it?”. When you first meet the customer make sure you qualify their wants and needs before pricing your product.
Moving a customer through the sales process naturally creates closes. Improving your closing ratio doesn’t add cost to the sale. It can be as easy as learning how to communicate better. In future articles, I’ll address other key selling metrics.
Please, let me know your thoughts about this material and if it helps or not!