Throughout time we all come across people who like to talk about their closing ratios. If you are just hearing percents being tossed around, the comments are probably coming from a sales rep who may think he/she is irreplaceable!
What is in a closing ratio? The experienced business owner will know immediately that it is not just the percent of sold vs the number of possibilities that tells whether or not a sales rep is profitable. Sometimes that same owner or manager may not be able to tell you exactly why, but their gut tells them whether or not a sales rep is profitable.
What should we examine? Well, for starters, if you are a company that pays for leads to come in the door, those leads vary in cost. If you have a sales rep that is given expensive leads and a sales rep that is given inexpensive leads, the one given expensive leads will have to either sell at a higher close rate or close at a higher price. If you are giving leads that cost minimal to nothing, the close rate or sale amount of the next person does not have to be as high.
Let’s take an example: Paul and Mark are salesmen. Paul has been given 50 leads that cost about $100 each, or $5000 worth of leads. Mark has been given 50 leads that cost $50 each, or $2500 worth of leads. If they both close 30 leads, they both have a 60% closing ratio. If their contract sizes are the same, Mark has been more profitable for us because we have spent half as much on advertising for his sales as we did for Paul.
Of 50 leads again, if Paul’s closed five leads at $30,000 each, he made $150,000 in gross revenues at a 10% closing ratio. On the same token, if Mark sold 30 leads at $3000 each, he had a 60% closing ratio and gross revenues of $90,000. If we were looking at just the closing ratio, we would say Mark is our high closer, but in reality Paul should be considered the “high” closer. It is his closes that are bringing in better revenues.
Now the trick for you as an owner or manager is to use the data you collect to your benefit in growing your business. We need to step up Paul’s closing ratio because he is bringing in the higher contracts. Put a high close and high contract together and you get some winning numbers. On the same token, find out why Mark is not getting higher price sales. Could it be that he is timid in asking for a sale on higher price products or services? Step over the timidness, put the shoulders back and ask for bigger sales! Increased prices with his closing ratio, and you will see increased revenues.
The whole purpose of tracking closing ratios is so that you have some system in place to hire, fire, train and assign. Hire based on the fact that you will track salesperson effectiveness on items other than just a simple closing ratio; fire based on the fact that if expectations are not filled by the numbers that tell the story, then they are shown the door. Training can be adjusted when you start to see trends within the sales team or individuals. Lead assignment can certainly be streamlined when you see salesperson strengths and weaknesses, and you can clearly see that certain people sell certain leads or types of sales better than others.