SaaS closing ratio explained

What is a closing ratio?

The sales closing ratio shows the number of business deals and presentations made and how many transforms into sales. It's designed to measure the effectiveness of your team's sales efforts. It can also be used to assess the efficacy of new sales strategies if your sales staff is trying out new sales pitches. 

The sales closing rate is derived by calculating the quantity of finalized deals and dividing it by the number of pitches sent and presentations given. Closing ratios help assess sales representatives and their performance. The ratio is also helpful in benchmarking your organization's performance compared to your competitors.

How to calculate your closing ratio

The sales close ratio formula

= the number of deals won/the number of sales pitches made or sent x 100

For example, if a salesperson sends out 20 pitches and books five deals, the closing ratio is 5/20, which makes the sales closing ratio 25%. 

Importance of the closing ratio 

The sales closing ratio formula is handy as a tool for assessing the lost and achieved sales of a sales representative. Lost sales are the deals or prospects that a sales rep cannot book. They can also be called qualified prospects that are not transformed into closed deals. This can be useful in evaluating their sales performance and value. 

Deals lost in sales play a significant role in the total sales a business can book. A single qualifying prospect lost is not just a customer lost but other potential deals and referrals that could have been added through a single customer.

Factors that affect the closing ratio

It is important to note that the performance of marketing and sales teams is one of many factors that impacts the effectiveness of your sales cycle and determines sales success.

Multiple internal and external factors determine sales success. It could be anything as simple as having a down day or a mix-up between teams that can negatively affect the number of deals that a team or sales rep closes. 

Your sales close rate can also be negatively affected by a lack of qualified leads in the pipeline, poor customer service experience, competition amongst vendors, and brand perception.

Improving close ratio

There are some strategies that sales managers can use to increase the number of deals closed and their overall sales close ratio. 

Here are some tactics you can try: 

Lead qualification

Before selling anything, look at the marketing list and see how they have been selected. Most leads are either leads qualified through sales (SQL) or marketing (MQL). Some teams use a mix of these two.  

The objective is to sell to candidates more likely to convert from leads to customers. To do this effectively, the sales and marketing teams need to be on the same page about qualifying prospects. 

Train your sales team

Salespersons are generally known as the front line of a brand and product or service experts. Many potential clients are looking for support from sales reps regarding the product. Your clients will understandably have many questions, and sales teams need to know how to handle them.

Your sales teams should be adept at handling customer or prospect queries in a way that puts your product in a more favorable light than your competition. This requires a deep comprehension of the product or service sold and an ability to advocate for your company's product. 

Understand your buyers

Doing a deep dive into the prospects targeted is key to knowing where they stand in the buying cycle. Do they want an immediate solution to their problem, or are they just doing their preliminary research and will buy at a later time?

Have your sales staff build buyer personas. Buyer personas or profiles are representations of the business's perfect customer. The profile is designed through market and buyer data and research.

If a business does not have buyer profiles made, your sales process may be flawed, and it could negatively affect your close rate. A detailed buyer profile should ideally have details like the demographics, motivations, and pain points regarding the product. Using a buyer profile during your sales conversations gives people a better idea about the product the prospect wants, their motivations, and their decision-making process.

Knowing this allows for a better-planned sales pitch, and customers are more satisfied as they receive answers and service according to their needs.

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