What is a Closing Ratio?
A closing ratio is a metric used to compare the number of sales prospects your sales team engages with to the number of deals closed. If you reached out to 100 sales prospects and closed 25 deals, your closing ratio is 25:100, or 25%.
While sales managers work to determine and set a closing ratio for their team, sales reps use it as a benchmark to gauge the average number of deals they should be closing.
Why is a Closing Ratio Important?
As a sales rep, you should know what your team’s closing ratio is because it will provide a baseline for the number of sales you should be achieving. It will also help you measure your individual performance against the company’s average.
For sales managers, closing ratios are important because they help set goals and larger objectives for the entire sales team. They also help measure success, so you can see how the sales team’s performance trends each quarter.
If your closing ratio is declining, it needs to be addressed immediately so you don’t miss revenue goals. And if your closing ratio is trending upwards, then it’s time to celebrate.
How to Calculate a Closing Ratio
To calculate your sales team’s closing ratio, you will need to analyze existing data. You can measure for the previous quarter, or look at an entire fiscal year, depending on your needs.
The formula used to calculate a closing ratio is:
(number of pitches sent to sales prospects / prospects who converted and purchased your product) x 100.
How to Improve a Closing Ratio
While sales teams use closing ratios to set benchmarks for performance, they shouldn’t be used as the minimum goal to achieve. Ideally, sales reps will aim to outperform closing ratios.
Effective Sales Prospecting
Make sure the leads coming through your sales funnel are a good match for your product. Always do research before reaching out, and make sure you understand your sales prospect’s needs; if you go in prepared, you’re more likely to stand out and make a good impression
Utilize Existing Accounts
It’s easy to get caught up in focusing on tapping into new markets, but don’t forget about the active customers in your account. If your product operates on a subscription basis you should dedicate time to renewals. Customer retention can affect a closing ratio, so don’t forget about it.
Satisfied customers are also more likely to recommend your product. Word of mouth goes a long way and can help bolster referrals.
Work With Your Marketing Team
Always make sure your sales and marketing teams are aligned in the messages they’re delivering. Effective marketing can help attract new leads, which will allow sales reps to make valuable connections. The messaging about your company’s product should be the same across the board, so ensure everything lines up.
Never end a conversation with a sales prospect before mentioning next steps. If things are left open-ended, it’s easy for them to forget about your sales pitch or move on to other options. Summarize the details for them and always follow up with a pointed call to action to move the conversation along. This can easily be done with a video email.
If it remains stagnant, you’ll never close out that deal.