Why measure sales closing ratios?

by | Sep 16, 2010 | Business

We just added a help article on how to calculate a sales closing ratio, based on how many quotes you create compared to how many turn into jobs.

The simple method in the help works for lots of people, but it’s not the whole answer.  Tracking quotes, leads and sales is complex, and I really wanted to give lots of options.  But before I could list the options, I had to think about why I might care.

I hadn’t ever considered the sales close ratio before.  But, it lets you evaluate your salespeople, sales process, and marketing in new ways.

  1. Who are my best salespeople? There are lots of ways to measure who’s best.  Typically, we judge the success of our salespeople by how much revenue they bring in – that’s ultimately what drives the business.But, by looking at what percentage is getting closed, you can get a different picture of what works well about a certain salesperson, and you can try to duplicate that.  Here’s a comparison of two Moraware salespeople.  Although it’s not the only measure (Hint: in the chart below, the salesperson with the lower close rate brings in way more revenue), this is one way to see who’s doing what.
  1. Are we getting better at sales over time? There are lots of ways to interpret the overall close rate.  Part of it has to do with the lag between getting new leads and turning them into customers.Overall, I think this measures how targeted our new leads are and how much we pre-qualify our leads before they ever get into our sales pipeline.  As long as we’re generally improving, it’s okay.  When there are big dips or spikes, it’s time to look closely at why.
  1. Which sources are bringing the most promising leads? For Moraware, we think it’s important to be at countertop and stone industry trade shows, and advertising in countertop magazines.  But which of those leads are easy for us to convert into customers?I knew, just based on our raw numbers, that a huge percentage of our new customers were referrals or people who’d used our software at another countertop fabrication company, but I had no intuition about the relative effectiveness of each lead source.

There are some big problems with all of these charts, which is what left me unsatisfied with the help article.  You can choose from a vast array of measurements, and they dramatically skew the results.  In all of the charts here, I did a comparison by looking at new leads to new sales in the same time frame.

In reality, there are several ways to pick the points in time you’re measuring.  I’ll be writing about that in the next blog post.

Related posts

Why Onboarding New Software is Important for Busy Countertop Shops

Why Onboarding New Software is Important for Busy Countertop Shops

Being a countertop fabricator most likely means that you don't have enough hours in the day to get everything done, let alone improve what you're already doing. Many fabricators are just trying to keep their heads above water! But if you are too busy to function...

Grow Your Countertop Shop With These First Steps

Grow Your Countertop Shop With These First Steps

Business is booming in the stone industry! Either you are flooded with new business or you are wanting to be flooded with all that new business. Am I right? Hint: say yes so we can stay friends. Working with fabricators for decades has shown us that growth can be a...

A Quick Guide to Setting Goals For Your Countertop Business

Goals are critical for any business, including the fabrication industry. Without them, it’s like playing a game of darts in a pitch-black room. You keep aiming and throwing, but you have no idea if you’re ever going to hit the bullseye. That’s where KPIs come...

Share This