How to calculate closing ratio

Competitive sales teams know that consistent success and growth require adaptability to their sales process. Yet random, aimless adjustments to strategy won’t do much to boost progress or performance. Sales teams need a reliable method to gauge how well they’re doing.

By calculating their closing ratio, sales teams can gain a deeper understanding of what’s working, what’s not, and which stages of the sales process need tweaking. In turn, they can make meaningful, intelligent improvements that improve the closing ratio over time.

Here, we’ll discuss the importance of the closing ratio, how to calculate it, and some key examples of how an organization may use it to their advantage.

What is a closing ratio?

Closing ratio — sometimes referred to as win rate, close ratio, closing formula, or lead-to-close rate — is a crucial sales metric that measures how many deals you’ve won vs. the total number of opportunities created. The formula can be used to calculate the closing ratio for individual sellers or the entire sales team as a whole.

While you can technically calculate the close ratio at any point in the sales process over any given period of time, it’s generally most effective when it’s used to measure a specific, later stage of the sales process over at least a three-month period. This will provide a more accurate picture of what’s really happening in the sales cycle, rather than potentially highlighting an abnormality or deviation caused by a single, one-off factor. 

Sales executives, regional sales managers, operational sales managers, and even sellers themselves can benefit from calculating and analyzing individual or team-wide closing ratios. At the team level, a poor closing ratio can signal inefficient processes, inadequate strategies, or misalignment with marketing. At the individual level, lower win rates might indicate performance issues that should be addressed before it’s too late.

Closing ratio formula

Regardless of who’s using it and when, the closing rate formula remains the same: 

Closing ratio = (# of closed won deals / # of opportunities created) x 100

It’s important to note that “won deals” refers to signed, closed contracts within a particular time period, while “opportunities created” means the total number of contacted leads within that same period.

Examples of closing ratio

To gain a deeper understanding of closing ratio and how it’s used, let’s look at a couple of hypothetical examples:

• Example 1: Maeve is a sales operations manager at a B2B sales organization. Her goal is to increase the sales team’s productivity, efficiency, and effectiveness; so she calculates the overall team’s closing ratio on a quarterly basis to identify areas for improvement. This quarter, the team closed 100 deals out of the 500 opportunities they created.
  
  Using the closing ratio formula, Maeve calculates a quarterly win rate of 20%, which is down from 27% last quarter. She uses this data to dig deeper, and finds out that the majority of leads dropped off after they received an initial presentation or proposal. After further investigation alongside sales managers, she realizes the majority of deals lacked adequate follow-up. Moving forward, the sales managers clarify and prioritize follow-up sequences with sellers to ensure leads don’t fall through the cracks, which — ultimately — contributes to higher win rates.
  
• Example 2: Tony, a regional sales manager at a company that sells marketing automation software, uses closing ratios to measure the progress and performance of individual sellers on his team. Over the last two quarters, he’s noticed that a few reps consistently struggle to hit quota, so he decides to intervene. During their next one-on-one meeting, Tony broaches the topic and finds that these reps' deals are stalled out due to pricing objections. He goes a step further to coach reps on how to better qualify deals earlier in the sales cycle and bring more, higher-level decision-makers into each deal. Combined, these coachable moments help motivates individual sellers to boost their performance.

3 strategies to improve closing ratio

While “improving closing ratio” is likely already a goal for every sales organization, identifying the right ways to achieve higher win rates (and doing so consistently) can feel like a shot in the dark. But with the proper approach and some intelligent tools for support, your team can make significant, highly impactful changes.

To increase win rate at the individual- and team-level, try implementing these proven strategies:

• Understand your prospects’ pain points: There’s a lot to be said for sellers who conduct thorough research into individual leads to identify their unique pain points. Taking this extra step helps them better understand, attract, empathize and engage with prospective buyers — and build authentic, lasting relationships that help get them across the finish line.
• Use software to unlock insights into pipeline health: Without the right software, your team will likely have trouble identifying where they’re going wrong. Powerful sales execution platforms offer complete transparency into the sales pipeline, so execs, managers, and sellers can uncover and ameliorate issues before they lead to a lost deal.
• Standardize your sales process: Standardizing and automating workflows within the sales process enables sellers to increase their efficiency while engaging with more prospects, without sacrificing the personal touch that yields greater results.