Why a 20% Closing Ratio is Never Acceptable

In many VAR organizations, it’s considered a good month if sales reps close 20 percent of the opportunities in their pipeline. Close 30 percent and you might see the entire company patting themselves on the back for a job well done.

I have a problem with that.

Truthfully, a 20 percent closing ratio is way too low.

I get frustrated when I hear business owners who are satisfied with a 20 percent closing ratio. It’s simply too much work to get qualified opportunities in the door and nurture them through the sales process, just so you could close one out of every five of them. That’s a lot of work for relatively abysmal results.

So, what is a good closing ratio?

In my experience, you should be closing 50 percent, 60 percent or more of the opportunities in your pipeline, particularly if you focus on these two controllable factors:

1. Value Perception

Most sales reps believe that if they could discount, they’d win more sales. But that’s simply not the case. You’ll win more sales when prospects can see the value of your offerings. This value perception begins before the sales process ever kicks in—sometimes as early as prospects’ first becoming aware of a need or your solution. During those early stages, your website, blog and social content all contribute to value perception and “Recognition ROI.”

Value perception is then reinforced during the sales process. The sales process you use (rushed and transactional or steady and consultative), the language you use (price vs. investment), and even the phrases you use (“Oh, we’ll work with you on the price”) all reinforce or undermine the value you worked so hard to establish before a prospect entered the sales process.

2. Continuous Qualification

Unfortunately, when your sales process accepts five opportunities for every sale as the standard, sales reps tend to loosen their qualification standards. As a result, they waste valuable time chasing less-qualified prospects.

Here’s what you should be doing instead: Qualify prospects harder and earlier.

Like value perception, qualification must begin before the sales process with how you describe your services and who you serve. It’s subtly reinforced in your website, blog and social content when you offer examples and testimonials. Your content should “talk” to the customers you believe are most qualified to purchase your services.

In the sales process, insert qualification gates at each stage and move unqualified contacts from the pipeline back into your nurturing campaign until the timing is right. They aren’t gone, but they aren’t consuming valuable sales effort time, either. This is critical to ensuring sales reps only spend time on prospects that are a good fit and prepared to buy.

Ultimately, it’s up to you to influence change. If you focus on the right things before and during the sales process, then I’m confident you’ll see your closing ratio climb to 60 percent or higher. If you don’t, then it will hover around 20 percent (or lower) and you’ll struggle to maximize your organization’s potential.

Kendra Lee is a top IT Seller, Prospect Attraction Expert, author of the award-winning books, “The Sales Magnet” and “Selling Against the Goal” and president of KLA Group. Specializing in the IT industry, KLA Group works with companies to break in and exceed revenue objectives in the small and midmarket business (SMB) segment.