Sales Close Rate: Definition, Industry Benchmarks, Formula to calculate, and tips to improve
4 minutes read
What is a Close Rate?
In sales, the close rate is the ratio of sales opportunities that are closed-won vs. the total sales opportunities created during a specific period of time.
Close rate is a valuable KPI in sales. It gives you insights into,
- How effective is your lead generation strategy?
- Is your pipeline healthy (without getting dried up or backlogging prospects at any stage)?
- How efficient is your sales team in closing sales?
- How well is your sales process working?
Why is Close Rate important in Sales?
Close rate helps you to determine,
- How many new sales opportunities need to be created
- And how many sales deals need to be closed
in a given month, quarter, or year to achieve your businesses’ sales and revenue goals.
Once you determine an overall close rate for your business for a particular time period, you can create individualized targets for each one of your sales reps based on their capabilities.
For example, you can set a target for a sales rep that in a month
- He needs to generate 10 new opportunities
- And close at least 3 deals
What does a good sales Close Rate look like in various industries?
A good close rate is highly dependent on your product, service, and industry. So before we get into numbers, don’t be alarmed if your sales organization isn’t meeting the benchmarks for your perceived field. Moreover, the truth is that even the best sales reps on the best sales teams in the world will only win a fraction of their sales opportunities.
So, here is a table that shows the average conversion rate across various B2B industries
|Industry||Average Conversion Rate|
|Computer Product Manufacturing||1.1%|
|B2B Software/ SaaS||1.1%|
|Call Center and Customer Service||2.0%|
|Shipping & Logistics||2.7%|
|Commercial Real Estate||2.8%|
|Lending and loan servicing||3.0%|
|Medical device and equipment manufacturing||3.1%|
|Point of sales (POS) services||7.0%|
What is the formula for calculating the close rate?
The formula for calculating close rate is:
Closed Won Deals / Opportunities Created
For example, if a salesperson creates 10 opportunities and wins 3, their close rate is 30% because 3 Closed Won Deals / 10 Opportunities Created = 30%.
To properly calculate the close rate, you’ll need both those data points to come from between the same period of time. To give you an example of what we mean by between the same period, let’s pretend we’re calculating the close rate for all of Q1. We would need to take all the deals that are closed-won in Q1 (regardless of whether they were created in Q1 or prior) divided by all the opportunities created during Q1.
Easy as that!
How to improve your sales close rate?
Here are useful tips on improving your businesses’ sales close rate:
Improve your prospect qualification process: Successful sales organizations have a “protect the pipeline” mentality. Sales leadership should enforce strict qualification criteria, using BANT (Budget, Authority, Need, Timeline) or a similar process. Qualifying prospects before they enter your pipeline (prior to becoming an opportunity), will result in a positive impact in close rate.
Improve your sales Process: Identify areas in the sales process where opportunities are converting at the lowest rate.
A sales process is made up of stages. Hunt for trends where stage progression is at its lowest. If you uncover a poor stage progression trend, develop & implement a plan to remedy it.
Improve the closing skills of your salespeople: Let’s say you haven’t found an issue in lead qualification or noticeable breakdown in your stage conversion, then turn your focus to sharpening your sales reps’ selling and closing techniques. There is nothing worse than finding viable prospects, spending time with them throughout the sales process, only to have them not buy your product or service. So, work closely with your sales reps on creating a more effective selling and closing strategy.
Learn how to measure and improve the effectiveness of your sales process
How to measure and improve the effectiveness of your sales process?
Ever heard of the puppy dog close technique? Learn all about it in this blog below
The Puppy Dog Close Technique: Let your customers experience your brand personally
Learn how to overcome your prospects’ resistance efficiently
How to overcome Prospects’ Resistance?
Learn all about sales gamification and how it helps in driving greater sales results
Want to learn some powerful techniques to overcome your customers’ objections?
Published on Wed Sep 1 2021