In the life of sales we all hear talk about closing or conversion ratios. Maybe a business owner talks about certain sales reps that have high or low closing ratios. Typically, if we hear someone has a good closing ratio, we think that person is a good salesperson.
What is a closing ratio? The dictionary defines it as the “success rate of finishing a sale.”
The dictionary definition is only part of the equation. Yes, the closing ratio is important but it is not an automatic measure of success. In business, success is usually defined as the bottom line, or profit. The experienced business owner knows that profit is not always the result of the percent of sold versus the number of possibilities that defines a salesperson’s success.
If you have a company that pays for leads, the lead cost varies, depending on where you are advertising. If you have a sales rep that is given expensive leads and a sales rep that is given inexpensive leads, the one given expensive leads will have to either sell at a higher close rate or close at a higher price. If you are giving leads that cost minimal to nothing, the close rate or sale amount of the next person does not have to be as high in order for your business to profit from those sales.
Take as an example salesmen Paul and Mark. Paul has been given 50 leads that cost about $100 each, or $5000 worth of leads. Mark has been given 50 leads that cost $50 each, or $2500 worth of leads. If they both close 30 leads, they both have a 60% closing ratio. If their contract sizes are the same, Mark has been more profitable for us because we have spent half as much on advertising for his sales as we did for Paul.
Of 50 leads again, if Paul closed five leads at $30,000 each, he sold $150,000 in gross revenues with a 10% closing ratio. On the same token, if Mark sold 30 leads at $3000 each, he had a 60% closing ratio and gross revenues of $90,000. If we were looking at just the closing ratio, we would say Mark is our high closer. Looking at it from a profitability standpoint, it is our low-closer Paul who is more profitable.
The whole purpose of tracking closing ratios is to measure profitability, but that profitability is not shown simply from the closing ratio itself. That is merely a starting point in a system set up to effectively manage the sales and marketing of your business. When you have the proper systems in place, you can hire, train, maintain or let go of employees based on the knowledge that you have a way to monitor the profitability of your salespeople, or conversely, the unprofitability.
CLICK HERE for a sample of a layout of a salesperson’s closing ratio and cost of sale acquisition for many lead sources.
George Odiorne once said that if you can’t track it, you can’t manage it. This hold true for closing ratios, too! Tracking will increase gross revenues!
WINNERS KNOW THEIR NUMBERS!
Article Source: http://EzineArticles.com/?expert=Susan_Raisanen
Profit Pro CRM is a lead, sales and marketing tracking software created to show exactly the numbers needed in running your business effectively and profitably!
