It is a common challenge among leaders and executives: They are swimming in data from a variety of sources or platforms, yet uncertainty remains when it comes to identifying ways to improve or enhance sales efforts. The real problem is not being able to connect data with insight.
Let’s begin with the most basic question: How does each salesperson know whether they are on track to hit their goal? Most sellers simply total all of the opportunities in their pipeline. But a better and more accurate way to do this is to isolate those sales which can be counted on – the ones following the same pattern as sales that typically close. These sales have a unique pattern because in these cases the customer wants the sale as much as the salesperson. As a result, the sales cycle is shorter, and the next steps are only a few days or weeks apart. Sales that don’t happen usually have big gaps between steps – often months. Even more often, the next step is not scheduled immediately, so the seller loses at least one to three weeks between every step just trying to reconnect and get back on the customer’s calendar. So, looking at the sea of opportunities in the pipeline is less helpful than simply looking at the few opportunities that fit the “closing” pattern.
Inspecting Your Pipeline
Now, let’s say we still have lots of sales in the pipeline and they add up to 10x the goal. In most cases, when the value of those pipeline opportunities far exceed the goal, we rarely take the time to fully inspect each individual deal to ensure they qualify. There is a next step and the sales cycle matches the “closing” pattern. However, even with the right amount of “padding,” the sellers may still miss their goals unless they also factor in their negotiating efficiency. If we look at the last 10 or 100 sales that closed and compare the proposal value to the contract value, we learn how much that seller typically loses during negotiation. If the seller typically loses 20% and their pipeline says they have $100k, we should only count on $80k. With negotiating efficiency factored in, is that seller still 1.5 to 3x their goal?
Identify Closing Ratios
Now, let’s look at closing ratio. While it may feel like if we take a closer look at this ratio it will teach us how many “first appointments” are needed in order to reach the goal, what we really learn from looking at this is the average ratio across multiple lead sources. Inbound leads close at a higher ratio than hard-fought outbound sales to new customers. Renewal sales to existing customers may have a higher ratio than upsell sales. So it is important to identify the closing ratio based on each lead source.
And finally, if the salesperson’s ratio is too good (consider a cashier in a supermarket), they may be spending too much time with friends instead of strangers and enemies – where the real upside exists. Sowing those seeds now will likely bring in new sales next year – when the goals go up again.
The next time you feel overwhelmed by data, make sure you have these three things: a laser focus on goals, a clearly identified inspection process and a definite understanding of your closing ratios. If you focus, track and analyze, it will lead to increased insight that can help guide your decisions. Remember: Data, not gut!
Steve Bookbinder, CEO of Digital Media Training, has been an exceptional trainer for over 20 years, conducting over 4,000 training workshops and delivering more than 500 keynote speeches at national sales meetings. His training expertise has taken him all over the world to work with major companies in training their sales and digital media sales teams. Steve sees selling as a competitive sport and a performance art – which ties into his past as a swimmer and coach, and a stand-up comedian. Fun fact: He swam the English Channel in August 2008.
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