How to Calculate and Improve Sales Win Rate
Congratulations! Your pipeline is being filled with sales opportunities. But, a few months from now, some of those will be closed-won or lost. But the question is, for every number of opportunities in your pipeline, how do you determine the percentage that will end up in closed deals?
This is where sales win rate comes in. More than any metric, it determines the number of prospects likely to turn into customers and offers a deeper look at your qualification process – are you filling your pipeline with viable opportunities? or are you nurturing ghost deals?
Before we dive into how to improve and calculate your win rate, let’s brush through what win rate is in the first place.
What’s Win Rate?
To provide you with an answer, we will lend some words from Mike Schultz, President of the Rain group, who defined win rate as “The percent of opportunities proposed or quoted that the organization won”
While that might be short, it’s important to note that when we talk about win rate, we aren’t talking about all opportunities, but rather, those that made it to the proposal stage.
And what we mean by the proposal stage refers to the point in the sales cycle where the sales person introduces their product or service as a solution, quotes a price, or sends a written proposal document to decision makers.
How to Calculate Win rate
Manually calculating win rate is achieved by dividing closed won deals by the total number of sales opportunities in your pipeline i.e closed won + closed lost.
When computing manually, the formula looks like this:
Sales win rate = Closed won ∕ (Closed won + Closed lost) x 100
For better understanding, here’s an example that shows the formula in action
For example, if the total number of opportunities in your pipeline is 200 and 120 were won while 80 was lost, here’s how what you will get if you plugged in those numbers into the formula above:
Sales win rate = 120 ∕ (120+ 80) x 100 = 120 ∕ 200 x 100
And that gives you 60%
How Can Win Rates Help Your Business?
What’s the benefit of knowing that you have a 60% win rate? Well, a lot actually but here are a few that stands out:
Understand Buying Decision Factors
With a qualitative and quantitative analysis of why deals are won or lost, sales reps uncover a detailed picture of the strategic thinking pattern of prospects when making purchases. This helps identify key objections and motivations on the side of the buyer.
Improves Qualification Process
Win rate often exposes loopholes in the qualification process. A low win rate could be a signal that the pipeline is filled with more “No decision prospects” and when that happens, sales leaders need to sit down to revise the characteristics that make up a good opportunity.
Better Sales Forecasting
Determining your win rate provides a glimpse into expected revenue. This way, companies can channel their effort to activities that result in wins.
How to Improve Win Rate
The first step in improving your win rate is to understand the industry’s benchmark and the percentage to measure against. Although nothing is cast in stone, Mike Shultz carried out an experiment where he surveyed 472 sales leaders from companies with a team ranging from 10 – 5,000 sellers and uncovered an average win rate of 47%.
For new sales reps, it’s difficult to hit that number and let’s not forget that every company has its own defined quota. But if increasing your win rate is at the top of your mind, here are things to do for a change:
Analyze Lead Quality
There are certain factors that could cause a low or high win rate and one of them is the number of customers that make it from demo to proposal stage.
When this number is low, it’s a sign that your pipeline is filled with a bunch of unqualified prospects. When that happens, it’s time for sales reps to review your qualification process to reassess the definition of your ideal customer.
Sharpen Your Skill
On the flip side, if customers that go from proposal to close are also low, this could mean your reps aren’t closing well. In this case, hands-on training on closing technique and objection handling is required.
Win-loss Rate Analysis
The reason a prospect chooses not to become a customer has to be identified. Is it because of your pricing? A missing feature or is your competition better? For example, if the reason for 80% of your loss is pricing, you can find a way for you and your sales team to tackle the objection if it comes up in the future.
As you can see, the win rate is sometimes a compound effort of all your sales activities from prospecting and qualification to closing. Set one foot wrong and you will end up with a low win rate.
Fortunately, with a tool like SalesDeck, you have a reliable option to supercharge virtual selling experience to help your sales teams close the right number of deals.