What is Your Closing Ratio?
What’s your closing ratio?” is a question you really need to ask yourself. Nine out of every ten people will usually say they don’t know. And the one person who does have an answer will say something along the lines of…
- my closing ratios are at about 20 percent
- my closing ratios are at about 40 percent
- I close 80 percent of all my selling opportunities
“What kind of statistical records do you keep?” “I don’t keep any detailed records.” is the usual reply.
“So how do you ‘really’ know what your closing is?” There’s usually a long silence…
Do you want to know if your hard work and effort is getting results? Then you’ll need to keep detailed records. You’ll need to test and measure your results.
Remember: With more detailed and accurate records you’ll close more sales, in less time, and with less effort. Interested in learning how? Read on…
Looking at Closing Ratios…
There are different ways to look at closing ratios. In the broadest case, you could assume that each time you create an opportunity…one where you think someone is going to buy something from you…you record it as an opportunity in a spreadsheet.
If the person did in fact buy something, then you closed the sale. Keep track of the results over time and you’ve determined your closing ratio.
If that’s a bit too broad, you could look at the number of proposals you prepare and deliver to a prospect by keeping track of the number of people who buy, versus the number of proposals…and you’ll have your closing ratio.
But closing ratios shouldn’t be the only determining factor. What about these additional considerations? The…
- number of times you meet with the prospective customer before closing the sale
- time it takes to close the sale
- average value of the sale you achieved
Number of Closes…
You may, or may not realize it, but effective selling is usually a result of effective time management.
It’s important that you know how many times, on average, you’ll need to meet with a customer before he/she buys from you. What percentage of your sales close on the first interview? The second? The third? The fifth? Or the twentieth?
Why is this important? Because if you have to keep multiple appointments with a potential customer, you’re likely wasting a lot of time and getting very little in the way of solid, bankable results.
A business owner found he sold 38 percent of his opportunities during the first or second meeting…but only sold another 9 percent of his opportunities in a third, or subsequent meetings.
His challenge was he was spending more than half his time calling on people a third, fourth, or fifth time, and most of these people ended up not buying. And, the average value sale for those who did buy was smaller than sales to customers who bought after the first or second meeting.
He drew a proverbial line in the sand, declaring that if he didn’t make the sale after the 2nd meeting, he would close the file and move on.
This freed up hours of time every day…time that he now spends looking for new prospects…those who “get it.” His business has soared.
A second consideration is the length of your sales cycle. How long does it normally take from the day you create the opportunity to the day you’ve a signed order? Once you know the time it takes on average, your challenge is to then discover ways to shorten it.
Most sales people spend far too much time telling the prospect about their…
- wonderful products/services
- their years of experience in the business
- the huge number of customers their company has
What they fail to do is ask great questions. Great questions to discover what it is the prospect is trying to accomplish…what pain the client wants/needs to be relieved of.
Because the sales representative doesn’t discover what the prospect’s goals, objectives, problems, challenges, or issues really are, he/she is unable to make a strong case that he’s/she’s offering a viable solution for the that prospect.
For that reason a decision is often put off to sometime in the future…and the sales representative calling back every few weeks asking, “Are you ready to move ahead with [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][insert your product/service]?”
Something else to think about: If a customer has a problem, why wouldn’t he/she want to do something about it…right now…today?
Perhaps the best way to identify pain and challenges is to ask great questions. Consider Margaret, a financial planner. On a sales call with a potential client, she asked, “What are you trying to accomplish with your financial strategy?”
The prospect started talking and for the nearly the next hour she told Margaret everything she was hoping to accomplish…everything she wanted to do. When she finished, she looked at Margaret and asked, “Is this something you can help me with?”
“Sure.” Margaret said, and wrote up the order.
What Do You Earn on Each Sale…
How much you earn on each sale is very important. If your average earnings are in the thousands of dollars, you can afford to invest more time in closing the opportunity than you would if you’re only making a couple of hundred dollars.
- a real estate broker might earn $10,000, $25,000, or even $100,000 on asingle transaction
- a mortgage broker, on the other hand, might only earn $1000, $2000, or perhaps $5000 per transaction
- while someone selling insurance may make no more than $300, $500, or $1000 on each sale
If you’ve got to meet with someone two, three, or even more times to close the sale…and you’re only going to make a $150 commission…you’re not making much money on an hourly basis, especially when you factor in commuting and preparation time.
Separate Buyers From Non-Buyers…
Once you know your closing ratios you’ll need to improve your screening skills so you can do a better job of identifying who is a real buyer and who isn’t…and in the shortest possible time.
If your prospect isn’t likely to buy, you’re better off knowing it sooner, rather than later. You don’t want to continue to follow-up with a prospect for 30, 60, or more days…only then to discover you aren’t going to make the sale.
When a salesperson admits their closing ratio is 20 percent, they’re really saying that 80 percent of their time is being wasted. If they only wasted 50 percent of their time, their business would more than double.
Think about this:
- when you close all your opportunities, you sell to 100 % of those who are could to buy
- when you don’t close all your opportunities, you fail to sell to 100 % of those whocould buy
Your real challenge may not be in your closing ratios, but may actually be in your inability to identify who is…or is not…an true prospect.
Five Ways to Grow Your Business…
Here are five strategies you can use to dramatically improve your business:
- Find More Prospects… Spend more time looking for people who need your products or services.
- Look for New People… Get out of your comfort zone. Call on people you’vehaven’t spoken with before.
- Ask Better Questions… Spend more time searching for the issues that are important to your targeted prospect, instead of telling him/her about yourself, your company, and your products. Become more “other” focused.
- Use the Telephone More… The telephone is a great time-saver. Spend more time calling prospects, using the phone to pre-qualify them before you have a face-to-face meeting.
- Prune Your Database… Remove poor prospects from your database. Stop calling on people you’ve called what seems like forever, and who’ve not done any business with you.