What is the Closing Rate + 10 Tips on How to Improve It
What metrics do you use to rate the quality of your sales managers’ work? Which one is the most important among them?
There are a vast number of different sales metrics, but there are some which are crucial. Closing rate is one of them, and we will figure out why it will be helpful for your business and how to calculate and improve it if necessary.
What is the closing rate?
First, let’s observe what the closing rate is and how to calculate it.
With a well-configured sales funnel, the company receives incoming requests from new customers daily. The data are sent to the sales department, where sales reps make everything to close as many deals as possible. But it is expected that not every lead becomes your client.
The closing rate shows how many prospects became your customers for some time interval.
How to calculate
The calculation is straightforward. You need to know only two numbers – total sales leads and the number of closed deals for the same period. Then, divide the number of prospects by the number of closed deals and multiply by 100%. Done; you have the percentage value, which is named the closing rate.
Some nuances of calculation:
- It doesn’t matter which period it will be – a month, a quarter, or a year. So you can choose what you like.
- When counting the number of leads, consider all types of lead requests and offers from your company that have been accepted, formal or informal.
- Closed deals are only those which were concluded with new clients. Repeat purchases do not count here.
What is a reasonable win rate?
There is no universal number for all businesses. It is very individual and depends on your industry, size, age, type of product, and the level of brand awareness of your company.
But there are statistics from HubSpot about the average closing rates for the most popular industries in 2022. For example, it is about 15% for the biotechnology industry and 19% for the finance industry. It is a little more significant for the computer software industry (22%), computer electronics industry (23%), and business industry (27%).
How to determine your ideal closing ratio?
We recommend focusing on your nearest competitors. Find out the information about closing rates of at least five of them and calculate the average score. This will be your benchmark as an ideal indicator.
But be careful and don’t choose your industry leaders if your company is not a leader. Also, recalculate your ideal score regularly as your organization grows.
What are the benefits for your business of knowing and improving the closing rate?
The main advantage is obvious – knowing this indicator, you can see how efficiently the sales team works. But there is another aspect, which may be even more critical for your company.
Imagine that you had 2 000 leads last month, but only 20 became your clients. So, the closing rate was only 1%. You may think your sales reps didn’t work well enough, which seems logical. But let’s look at the leads your marketing team gave. Are they all high quality and targeted?
It is a common problem when marketing and sales teams are not adequately coordinated. They can have different strategies and see customers in different ways.
HubSpot research shows that only 41% of sales teams receive high-quality leads from their marketing departments, while the other 14% are dissatisfied.
Consequently, your sales performance is lower than it could be if marketing efforts were put in the right direction. Sales and marketing must work in cohesion if you want the best result.
Summing up, the closing rate helps evaluate the quality of leads your marketing team gives and the sales efforts your managers are putting in. But what should be done to improve the work of your marketing and sales departments to raise the rate and increase sales?
10 tips to improve the close rate
Look at our to-do list and decide what things you can or need to provide.
- Synchronize the work of sales and marketing departments. It is the primary step. Develop an overall strategy and ensure that both departments have the same target and that each employee understands your target audience, knows the product well, and correctly presents information about the company.
- Reduce response time.The statistics show that 82% of customers expect an immediate answer within 10 minutes. Thus, create the conditions for your managers to process applications as quickly as possible.
- Keep the focus on customer needs.No one is interested in you till you give something valuable or help solve a problem. In advertising, blog articles, personal communications, and emails, always focus on the needs and concerns of customers that you can potentially solve and showcase your product as a solution.
- Know your prospects.And make sure everyone in your company also knows them. Teach your sales reps to be flexible with different buyers’ behaviors. Also, remember that there could be a lot of decision-making processes your leads will go through.
- Make the sales process conversational.Teach your employees to listen to the leads and to be more human and client-oriented. The customer’s experience plays a significant role, and their impression of communicating with a manager can play a decisive role in his buying decision.
- Add a clear call to action.At whatever stage of the customer journey your potential client is, you must give clear instructions on what he should do next and what will happen after that. But it is essential in the early stages when he meets your company. So, consider the calls to action your company broadcasts through marketing tools.
- Show numbers to your prospects.No one believes the big words about “high quality” and “universal solution” anymore. People want to see actual results expressed in numbers and cases. Make sure you show facts that inspire confidence and close the deal faster.
- Train sales reps to be confident.Confidence sells; remember that. Give your sales team all the information they need to make good contact with leads.
- Analyze failures by asking prospects.Do not give up on those who did not buy from you immediately. Every failure is a point of growth if you use the situation correctly. So get in the habit of asking leads why they didn’t become your customers after all. What stopped them, what did they lack, what annoyed or embarrassed them? Use their answers to improve your sales process.
Also, you can record calls between your sales and leads to our Call Recording feature and then use them for training your reps.
- Use a referral system.Paying customers is your best free advertisement. Encourage them to recommend your company even more by providing a loyalty system for bringing new customers. For example, a system of cumulative discounts or special gifts. These leads will be much warmer, so you will close more deals and, respectively, raise your rate.
Use the closing rate as a key performance metric for your sales and marketing departments, but don’t forget other criteria, such as Customer Satisfaction Score or LTV. Instead, try to keep a balance, sensibly evaluate and use your advantages and opportunities.