Are Your Salespeople Spinning Their Wheels?
Just like a car that’s stuck on ice and spinning its wheels while getting nowhere fast, your salespeople may be revving their engines but standing still. And they may not even be aware of it. What a waste!
Staying with the car metaphor a bit longer, when you’re behind the wheel, you can use the instruments on the dashboard along with your eyes and ears to get an indication of what is or isn’t happening. For example, if the tachometer is giving you a high reading, the speedometer a low reading, the engine is roaring, and you can see that you’re not going anywhere, you can assume a lot of energy is being spent for little or no result.
The Salesperson’s Dashboard
Instead of a tachometer, speedometer, fuel gauge, etc., the salesperson’s dashboard has a closing ratio, number of calls, active opportunities, and other indicators to indicate if they’re firing on all cylinders, as it were. The problem is that few salespeople or their managers bother to watch the “gauges” to see if any of them are in the “red.” In fact most don’t know what the gauges should read in the first place so, even if they had the information, they wouldn’t know if it was good or bad.
The Main Indicator
One of the most common indicators is a salesperson’s closing ratio. Closing ratios tend to be industry specific rather than salesperson specific. The fact that someone has a 30 percent closing ratio may be good in some (most) types of selling but would be considered poor in others. For example, the HVAC (heating, ventilation, air conditioning) industry generally looks for a 45 to 50 percent closing ratio whereas highly competitive, commodity-type sales may only have a 5 to 10 percent closing ratio.
Building a Benchmark
What’s an appropriate closing ratio for your people or your industry? Want to find out? If you’ve got a good network of contacts within your industry, you may be able to get some good numbers. If you’re in an industry that has an association, contact them to see if they can help. If they don’t know the numbers, encourage them to find out as a service to their members. After all, what could be more important than closing sales and bringing in money?
You may have enough data lying around your company to calculate your own closing ratio. There are a couple of ways to do the calculation. Basically, the closing ratio is the ratio between the sales you start (sales opportunities) and the ones that actually turn into business (closed orders). It’s easy to find the ones that closed because you have the purchase orders, contracts, or invoices somewhere.
The problem is defining what constitutes a “sales opportunity.” One way is to only count those opportunities where a price quotation or formal proposal was generated. In this case, the closing ratio becomes the number of invoices divided by the number of quotes or proposals multiplied by 100. For example, if you generated 3500 quotes during the year that resulted in 1000 invoiced sales, then your closing ratio would be:
(1000 / 3350) x 100 = 29.9%
Now that you have a company closing ratio as a benchmark, you can do the same type of calculation on a salesperson-by-salesperson basis to see who’s in, who’s out, who to leave alone, and who to help.
What’s a Sales Opportunity?
If you don’t want to or can’t use the price-quote/formal-proposal method to define what is and isn’t a sales opportunity, there are other ways to do it. By far the worst way is to ask your salespeople.
For the most part, salespeople are incredibly optimistic and anyone who has a pulse, is breathing, and has made an inquiry, no matter how innocent, into what the salesperson is selling, instantly becomes a hot prospect and great opportunity.
I wrote about this phenomenon in an article for salespeople, Get the Crud Out of Your Sales Funnel, where I gave salespeople a quick-and-easy method to determine what the chances are of getting a sale. You might want to check out this article.
The idea is to pick a threshold percentage as to what constitutes a valid sales opportunity and then track that opportunity to either a win (closed sale) or a loss (weeping and moaning). My suggestion is that any opportunity with a 50 percent or more chance of closing is a valid sales opportunity for tracking purposes.
Delegate the Duty
Why not get your salespeople to determine their own closing ratios? Personally, I feel that each salesperson should know what his or her closing ratio is, and I like to see them figure it out for themselves from time to time. All they need to do is keep a month or quarter’s worth of records and then do the math.
One of the benefits of this activity is that it sensitizes the salespeople to what is and isn’t a good opportunity as well as helps them focus on how they might close more sales more often.
If a salesperson is a bad judge as to what is or isn’t a good sales opportunity you will see that fact reflected in his closing ratio, which will be too low. If a person’s closing ratio is high but his actual sales numbers are low, you know that he doesn’t have enough sales opportunities in his sales funnel and needs to spend more time prospecting.
Give Them Traction
I’ve always believed that the best form of sales management is self-management and if I can help my salespeople manage themselves, I’ve moved the responsibility to where it ought to be on the people who are doing the job.
Something as simple as having your people determine their closing ratios may be just the thing they need to give them the traction to stop them from spinning their sales wheels.
Help your people to help themselves.