Closing Ratios

I like how this percent sign kind of looks like a roller coaster, which is sometimes how being a sales manager can feel.

Sometimes it feels like I’ve spent my whole professional life being ruled by metrics.

Top line. Bottom line. Gross. Net. And of course all the derivative metrics. Turns. Shrink. Sales per square foot. Warranty percentage. Defective percentage. Closing ratio.

Ah, closing ratio. My favorite.

Not really.

If you don’t know, closing ratio calculates how many prospective customers became actual, paying customers.

The simplest ratio is the number of people you talked to, versus the transactions you made.

At the store level it’s often calculated using traffic counters at the doors, and it’s number of people through the door all day, divided by the total number of transactions.

Unlike hard metrics like revenue, what constitutes, an acceptable closing ratio can vary widely.
For a destination location, where people have to make a special trip to come and see you, it can be expected that most who walk through the doors are there for a reason, and are likely to buy.

Conversely, a store that’s a mall anchor is likely to have a larger number of passers-by who are simply entering for egress to the mall, as well as a larger number of window shoppers and tire kickers.

Despite the wild variance in what can constitute an acceptable closing ratio, it remains an important metric.

There are only so many hours in the day, and there are only so many contacts that you can make with prospective customers each day.

Not only that, but there’s a finite number of customers, period.

They have money to spend, but they can spend it anywhere. The key is, are they going to spend it with YOU?

Knowing how many prospects are being converted gives professionals a more clear picture of how effective they and their teams are.

Their delusions to the contrary aside, salespeople are not finely tuned, high performance sports car engines. No one fires on all their cylinders, perfectly, all the time.

There is always something in the sales process that can be tuned up. There’s always a better way to approach each step.

For that matter, making sure your sales people are actually following the steps, in order, goes a long way to improving their closing ratio.

You don’t have to be perfect, although it would be nice, you just have to do better than your competition.

 

Lee Distad

About Lee Distad

Lee Distad is a rAVe columnist and freelance writer covering topics from CE to global business and finance in both print and online. Reach him at lee@ravepubs.com