Are your close rates lying to you—and quietly destroying your margins?

If you’re measuring close rates based only on quoted deals or “verbal wins,” you’re likely underestimating your true cost to acquire customers and making flawed decisions about marketing spend and sales performance. This episode breaks down why most businesses get close rates wrong—and how that mistake flows straight to the bottom line.

By listening to this episode, you’ll learn:

• How to calculate a true close rate that actually reflects your real cost to serve and acquire customers
  
• The difference between lead-to-quote and quote-to-close metrics—and how each one reveals different problems in your sales engine
  
• How to use open, lost, and long-burn deals to identify where your sales team is really getting stuck (and where you can lift results fast)
  

Press play to learn how to set a clean close-rate baseline and use your CRM to uncover the exact levers that will improve sales performance and profitability.

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Episode Transcript

Ben Wright: 

In this episode, you will learn how to not only measure your closing rate effectively, but use that rate to leverage greater closing numbers in the future. 

Intro:

Welcome to Sales Process Made Simple, the show helping seven to eight figure industry construction and trade, sales and business leaders finally end the stress of inconsistent sales by simplifying your sales systems so your team can close more deals and grow faster.

I’m your host Ben Wright, a leader who has been building businesses and sales teams just like you for the last 20 years.

Ben Wright:

Let’s get straight into how we understand why a close rate is so important for us to know. And I’ll say now that the number one reason that I see this often get misrepresented is the exclusion of deals, the exclusion of leads that came into the business that weren’t quoted, the exclusion of long burn deals, or the exclusion of deals where a customer has given a verbal, for example, but never proceeded. And I could talk about this for hours around the different ways that salespeople cut deals out of their close rate. But the end impact is that if we have an overrepresented close rate, which a lot of these impacts have, we end up looking at our marketing costs and our costs to generate leads as being well and truly understated. If we are looking at leads that convert to quotes 50% of the time and we’re recording closed deals from only what’s quoted, then our marketing costs, for example, are only going to be 50% of what they actually are. And where this impacts is, of course, down the bottom line.

So the easiest way to be quoting close rates is very, very simple. Leads that come into the business is your bottom number with over the top of that closed deals, right? A deal that is one versus a lead that comes into the business. That is the only way to be measuring close rates effectively to give us a true understanding around our cost to serve business. 

Now, where things start to get a little bit interesting is where we want to be looking at sales team performance. And my recommendation here is once we get that baseline number correct, that is leads into the business, right, with a top line number of closed deals, once we get that raw closed number sorted out, that we can then start to have a look at a couple of other close rates. 

First of all is going to be lead in to quoted ratio. That is the number of deals that come into our business measured by how many of those are quoted. Because what we’re assessing here is the effectiveness of the leads we’re generating, right? And essentially the close rates to go from lead to quote. That’s the first area that I really encourage sales people to look at when we’re diving a little bit deeper.

The second area is around quote to close rate, because this is where we’re truly assessing sales team performance. In the most part, I should say, where we’re truly assessing sales team performance, because where we have a sales person who is perhaps not converting anywhere near the number of leads to quotes, we have an impact there, but generally my experience says that sales people are reasonably effective at getting quotes out if they are following the due process of the business, right, calling them within a time frame, getting out to see them and so forth. But where we start to really see an impact on quoting close rates is when we look at quoted to one.

Where we can start to see some movement here though is how often our deals move into that long burn filter. So what I’ll often see sales leaders look at is not just deals quoted into deals won, but also deals won versus those that are lost and versus those that remain open. 

So let me give you some working examples here. Where we see 100 quotes go out from a sales person and 30 of those being won, we have a close rate of 30%, quite simple. But in a number of instances we might see that those 70 deals that remain open are not created equal across our sales team. We may have one sales person who of those 70 deals, 50 of those are closed lost and 20 remain open.

In that instance we start to have a pretty good understanding that their close rate is around about that 30% because we’re always going to have a percentage of deals that remain open, right, and some of those 30 deals that have been closed in that number of 100 have possibly come from previous pipelines, right. So without making it too complex, pipelines do roll rather than being perfectly precise. But where we have a sales person who may have 50 of those deals open, so 30 close, 50 open and only 20 close lost, we have an opportunity to really be driving close rates. And that’s where we can start to look at how we can be helping that sales person close out those deals. And that’s generally where I’ll be focussing my attention with sales people are those who are able to drive engagement within deals but not necessarily get them over the line, right. And these are the types of sales people, yes sometimes they simply should be closed, right, and they’re open by mistake, right, or open by laziness. But often we’ll find that these deals are ones where people can really start to turn their negotiation strategies, to turn their understanding of customers and to really work shop deals hard. 

So for me the key piece here when it comes to assessing closed deals is to be looking at that baseline number but also diving a little deeper around quote to close numbers but in particular quote to close based on deals lost and quote to close based on deals still open. Because from there as leaders we really do get to dig in.

Now that can be quite hard to manage, that’s where your CRM becomes really really important, making sure that we’ve got it set up, that we have deals into the system and that our teams are effectively working their pipelines. We’ll often see with teams that I work with when we open up a dashboard we’ll see close rates quote to close for a sales team, we’ll see close rates quote to open deals and we’ll see close rates quote to lost deals.

 Now I’m a big advocate of simplifying metrics and generally we talk about the three box model which I absolutely will be focussing on shortly. However when we’re wanting to really dive deep and understand sales closing rates they’re the metrics that I’ll be looking at and when we can use the CRM to help implement them i.e. some mandatory issues by our team that’s when we get the power to be able to analyse what we’re doing and work out what levers we can pull to be adjusting our close rates. Now yes this is possibly a more esoteric episode that we’re going through because close rates are a huge beast on their own but the aim of today’s episode is very much to encourage you to start somewhere with close rates, to really understand how marketing leads versus deals closed as a beginning but then also to funnel into sales quotes and deals closed from our sales team right and when we see a closed number not just to take it as gospel but to have a look in at those deals that remain open, those deals that are closed, those deals that are long burn and perhaps the behaviours behind the sales teams that are implementing or impacting those. 

What I really like to close this out with is to use a CRM to make sure we’re measuring those right so they’re the key outcomes that we need to be following in from today and I think the call to action here the next step for you to do is to be setting up your CRM to make sure that you can accurately record this data and to get a baseline understanding around where your deal close rate sits that is from lead in to deal closed start there that is by far the most impactful close rate we need to know.

Now thank you for joining today I’m very grateful for taking the time to listen to the 25 years of sales expertise that we have we’re dropping episodes every Monday, every Wednesday and every Friday they’re normally with you in the car when you get in slightly different depending on the time zone but between now and the next episode we air please keep thinking about how you and your team can be one percent better each and every day because it does make all the difference. Bye for now

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