Sales closing ratio is an important sales KPI to measure the effectiveness of a sales program. It refers to the percentage of sales opportunities that result in a closed sale.
A sales closing ratio is made up of a numerator (the number of closed sales) and a denominator (the total number of sales opportunities). It’s difficult to compare ratio metrics across companies, since every company has a different sales plan and way of defining leads or bringing them through the sales process.
However, tracking the closing ratio for a sales team can be useful in identifying which parts of the sales process could be improved. It can also be useful for testing new markets and customer segments, because sales leaders have baseline closing ratios to compare from.
What’s the difference between closing ratio vs conversion rate
Closing ratio typically refers to the percentage of sales opportunities that result in a closed sale. It measures the effectiveness of a salesperson or sales team in converting leads into paying customers.
Conversion rate, on the other hand, is a broader term that can refer to any desired action taken by a prospect or customer, such as filling out a form, downloading a whitepaper, or making a purchase. It measures the effectiveness of a marketing or sales effort in persuading prospects to take a specific action.
While both closing ratio and conversion rate involve measuring the rate at which leads or prospects turn into customers, closing ratio specifically refers to the percentage of sales opportunities that result in a sale, while conversion rate can refer to a broader range of desired actions taken by prospects or customers. Technically, sales closing ratio is a type of conversion rate.
How to calculate a closing ratio?
Defining a sales opportunity
In the context of measuring closing ratio, a sales opportunity is a qualified lead that has expressed interest in the product or service and is considered to be a potential customer. Companies can identify sales qualified leads through lead scoring systems as well as by models such as BANT (Budget, Authority, Need and Timeline).
In most cases, not all leads or prospects are counted when calculating a closing ratio. A general lead or prospect is someone who has shown some level of interest in the product or service but has not yet been qualified as a potential customer.
For example, someone who fills out a form on the company’s website requesting more information about the product would be considered a lead. If a sales representative follows up with that lead and determines that they have a budget and a need for the product, then that lead becomes a sales opportunity.
Sales closing ratio formula
Sales leaders can calculate closing ratio using the following formula:
For example, if a sales team closed 10 sales out of 50 opportunities, their closing ratio would be:
Closing Ratio = (10 / 50) x 100 = 20%
This means that the sales team closed 20% of the sales opportunities they had.
What is a good sales closing ratio?
What is the best way to determine a good sales closing ratio for any business? For the most part, that ratio is going to depend on the industry, product, and sales process of that business. Typically, a good closing ratio for most B2B sales organizations is around 20-30%.
It's important to note that a high closing ratio doesn't necessarily mean success in sales.
For example, a salesperson who only closes deals with clients who are already highly motivated to buy may have a high closing ratio, but they may be missing out on potential opportunities to expand their client base.
Instead, sales teams should focus on improving their overall sales process, from lead generation to closing deals, and strive to achieve a balance between closing rates and volume of sales.
By constantly refining their approach and developing relationships with their clients, sales teams can improve their closing ratios and ultimately drive more revenue for their business. Sales closing ratio is just one piece of this puzzle.
Why track sales closing ratio?
Sales closing ratios are best used longitudinally and within the context of one’s own company.
In other words, if all else remains equal, a lower closing ratio than a company is used to can signal issues with the sales process, including poor lead quality, lack of product knowledge, or ineffective sales techniques.
On the contrary, a high closing ratio indicates that the sales team is improving their closing techniques or lead quality. Sales leaders can dig into the reasons for the improved sales closing ratio and use these learnings to improve the sales process.
Sales closing ratios can be used to:
In summary, sales closing ratio is part of a suite of metrics that helps sales leaders make better decisions for their organizations.
The main factors affecting closing ratio
Several factors can impact a sales team’s closing ratio, but the three most impactful factors are:
Lead quality
Sales process
Closing techniques
The most significant factor is the quality of your leads. The higher the lead quality, the better the closing ratio.
The sales process itself impacts closing ratios as well. This includes when a lead or prospect is considered qualified (and thus, an opportunity), how first impressions are made, how the company brings products to market, and how long the sales cycle tends to be. Any touchpoint in the sales process can impact closing ratio.
Finally, at the end of the sales process, the closing techniques of the account executive can make or break deals. This includes not only effective negotiation, but also working with procurement, finance, and legal teams to get the details of a deal done.
How to improve closing ratio?
The number one way to improve the sales closing ratio is to improve the quality of leads that are qualified for meetings.
Improving the quality of leads is multifactorial; everything from the industry, price point, go-to-market strategy, product line, customer segments, and external factors can impact lead quality. It’s not just the sales team that can control this lever.
Outside of lead quality, there are several ways sales teams can improve their closing ratio:
Closing techniques to improve closing rate
When a lead reaches the desk of an account executive, here are a few ways they can improve their close rate:
There’s no magic bullet to closing more deals. It’s a function of many small things being done well, and a company that invests in continuous measurement and improvement.
How LinkedIn Sales Navigator can help improve closing ratios
With LinkedIn Sales Navigator, closing ratios can be substantially improved with helpful targeting, data-informed insights, and even recommendations.
Here are a few key ways to use LinkedIn Sales Navigator to close more deals:
