What’s A Good Closing Percentage in Sales? And How To Increase Yours
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Read enough articles about sales and you’ll come across some inspirational (and humbling) sales stories.
Some of these stories are so good you can’t help but question your own prowess as a salesperson. How are they closing 50% of deals? I’m nowhere near that level. Am I doing something wrong?
The truth is, there ARE some really gifted salespeople. And they DO have astonishing sales closing rates.
But for the rest of us mortals here’s how to think about what’s a good closing percentage in sales. And we’ll look at some ways to elevate your closing ratio in the process.
Sales Closing Rates Can Be Deceptive
When I started out doing cold email I was always amazed at the results some of the big name industry professionals could achieve. Some of them boasted email response rates of over 30%, and conversion rates I could only dream of.
Except I wasn’t the one who was dreaming.
After a while I realized the numbers were being “massaged” – to put it kindly.
If I contact 100 people and 3 book meetings then I have a 3% positive response rate. Pretty simple, right? I assumed that was how everyone did it.
It turns out that the data can be “interpreted” differently.
The way they see it, if they contacted 100 people but 2 bounced, then those potential customers don’t count. From the remaining 98 contacts only 45% opened the email.
Which means that the 55% of prospects who didn’t open the email don’t count. (I’m a bit fuzzy on the logic behind that point).
From the 44 people that opened the email, 3 booked a meeting. So now they have an impressive 7% positive response rate (3 positive responses divided by 44 opens).
In both examples 3 out of 100 contacts booked a meeting. But the positive response rates are completely different.
The point is, sometimes sales statistics are crap. At the end of the day it’s the deal that matters. And while it’s helpful to know what’s a good closing percentage in sales, don’t pay too much attention to someone else’s numbers.
Sales Closing Ratios Aren’t A Simple Formula
We think of sales closing ratios as a simple formula
deals / total sales leads x 100 = closing rate %
But it isn’t. The thing is, context matters.
Traditional sales wisdom suggests that the best sales representatives close 30% of deals. And ‘regular’ sales professionals close 20% of opportunities.
If that seems high to you, don’t worry about it; seriously.
Avoid comparing your results to what someone has decided is a good closing percentage in sales. Your circumstances might be completely different.
How Do You Count A Qualified Lead?
OK, here’s the unfortunate truth. Every company counts its leads a bit differently.
In a small company where the sales representative is doing everything, the close ratio could be under 4%.
How is that possible?
Well, most sales leads that come in aren’t very qualified. So if you include those ones in the count, your closing ratio will be weak.
In our case, about 25% of lead enquiries are completely unqualified. Should they be included in the calculation of our closing percentages in sales?
Or what about the people that express interest but don’t show up to a meeting? For us, about 15% of prospects fall through the cracks. Despite showing some initial interest they cancel the meeting, or don’t show up. Should they be included?
The easiest way to have an amazing closing ratio is to get your marketing team to super qualify the leads you’re working with.
Depending on how qualified they are, the odds of success go way, way up.
Update the Closing Rate Formula
Clearly it doesn’t make sense to measure sales closing rate by counting ALL the leads that come in.
It makes more sense to just count the companies to whom you have made a formal proposal. Do this and your closing ratio will automatically be much higher. And this is how most companies do it anyway.
With that in mind, your closing percentage in sales should be calculated as:
deals / formal proposals x 100 = closing rate %
Wanna know the secrets used by sales reps with the most optimal closing ratio? Here’s how they get new customers with ease.
Only Propose To Fully Qualified Leads
Potential customers often ask for a proposal as part of their information gathering process. But these proposals don’t do you any good if they have little chance of converting. Make sure they are fully qualified leads before you provide a proposal document.
Wait Until Further In The Sales Process To Make A Proposal
As soon as the proposal is provided there’s a sense of completion. Either you get the deal, or you don’t.
So hold off on supplying the proposal document. Make sure the deal has a high probability of closing and all objections have been articulated. Basically, turn the proposal into a closing agreement rather than an informational document.
B2B Close Ratios Vary By Industry
Hubspot research shows that closing ratios for qualified leads vary widely by industry. So when you see a fixed number like ‘good sales professionals have closing percentages in sales above 20%’ take it with a grain of salt.
The truth is, every industry is different. Biotech might have an average close rate of 15%, while software is at 22%.
It’s tough to benchmark your results when you don’t even know what you’re comparing them to.
Size Matters For Sales Success
Larger companies have more resources than smaller firms, and those resources matter. We all know this.
Large companies have marketing teams that increase prospect qualification. They filter out all the crappy leads long before they get seen by a sales representative.
For small companies, one of the biggest challenges is dealing with lots of crappy opportunities that come in. And sometimes that means low value potential customers get a proposal.
The reality is, smaller companies talk to a higher percentage of total leads – mostly because they have to!
Lead Sources & Engagement Matter
Quick, who’s more likely to close? Someone who filled out a request for a whitepaper? Or the best friend of an existing client who loves your work?
Everything being equal, the random whitepaper lead probably has an average close rate below 3%. And a referral from an existing client will probably convert above 30%. The second opportunity is TEN times more likely to convert.
But on paper, they’re both leads with an equal chance of converting. Which simply isn’t true.
Established companies have leads coming in through their existing network of clients and partners. New companies usually don’t have access to these same resources.
Similarly, large companies have a reputation, social presence, and content that have worked to continuously warm prospective clients. Many of them are ready to buy even before the sales department has gotten the lead. Of course the salesperson closes these opportunities!
It’s All About Getting Qualified Leads
A few years ago my closing percentage almost DOUBLED in just one day.
Did I magically become a sales god overnight? Sadly no.
At the time I was doing too many unproductive meetings so I put our pricing on our website.
You can guess what happened. Our prospective clients began to ‘self-qualify’ themselves. Transparent pricing meant only the most qualified prospects booked a meeting. They understood the scope of our work and the costs involved. So most of their informational queries were already satisfied.
When they took the next step to book a meeting they were already far along in the sales process. And our lead quality was very, very high. My sales results went from mediocre to a very good closing ratio.
Makes sense, right?!
So take a HARD look at your lead quality. The way you count your leads will have a bigger impact on your ideal close rate than any improved sales approach.
Clarify Your Value Proposition
Counting semantics aside, the primary factor that has the biggest impact on whether a deal goes through is your value proposition. So work on it until your offer is so compelling it doesn’t make sense to decline.
Position your solution in terms of the economic impact you’ll have on their business. Costs mean nothing if they are massively outweighed by the benefits over a given timeframe. Find out how much their problem is costing them. What pains do they feel as a result?
The bigger the problem you solve, the more likely they are to convert.
What’s The Optimal Close Percentage For OUR Company?
We all know that every company is different. So it’s worth wondering whether it makes sense to benchmark our close ratio against other companies or other salespeople.
While the averages are useful to know, it probably doesn’t help to compare ourselves to others people with massively different circumstances.
A better question might be, ‘what’s the optimal closing percentage for sales in OUR company?‘ When you can answer that, then you’re well on your way to a robust sales process you can rely on long term.
Sales Success Is Bigger Than Your Closing Rate
Hopefully by now you’re more comfortable with your sales stats.
It IS important to keep improving. But comparing your numbers to someone else’s in isolation is a fruitless exercise.
Stay focused on qualifying your leads, and only make a formal proposal after all objections have been handled.
Do that and your closing stats will skyrocket!
What do you think? Agree? Disagree?
Look forward to hearing from you!