Is Your Closing Rate Too High?

Furniture World News

By Richard Fenton and Andrea Waltz Editor's note: For a more in-depth discussion of closing rates and average sale see Joe Capillo's FURNITURE WORLD Magazine series "Staying Alive During Slow Times" Parts 1-4 posted to the Marketing Article Archives on the furninfo.com website. It’s the last day of the month and Sheila Johnson is sitting at her computer, filling out the performance recap required from every salesperson in her company. And after typing in the final numbers, she’s all smiles – after all, she’s just calculated her “closure rate” which has come in at an impressive 45 percent! But as she hits the “send” button, little does Sheila realize that her high closing rate should be setting off alarm bells because, in reality, it is actually too high. You may be wondering: How can your closing percentage be too high? How could a high number ever be a bad thing? The answer is simple: When your success rate is so high, it indicates that the bulk of your precious selling time has been spent going after small deals … easy successes … no challenges. This, of course, is counter-intuitive, going against common sales logic. Ask almost anyone in sales the key to success, and they will usually tell you it’s to close a greater percentage of the calls you make. And while this logic is hard to argue with, it can be done! Closing “Percentage” vs. Sales “Volume” There’s a world of difference between the amount of sales you generate – volume – and the ratio of calls to closed deals – percentages. Generally speaking, the former (the amount of sales you generate every week or month) should be increasing as you spend time in the job; the result of having gained product knowledge, honing your presentation skills and repeat customers. But contrary to what you’ve probably been taught, there comes a moment when your closing percentage should not be climbing with it. The reason for this can be summed up in two words: “Jerry McGuire.” Remember the classic scene in “Jerry McGuire” when Jerry (played by Tom Cruise) is on the phone in his office, trying to convince his one and only client, football player Rod Tidwell (played by Cuba Gooding Jr.) to stay with him? And then Rod Tidwell asks Jerry to literally scream a variety of random, ridiculous, humiliating things into the phone. But, at the end, there is just one phrase that Rod wants to hear: “Show me the money!” And therein lies the problem with closing percentages; they aren’t money, they’re statistics. And in the final analysis – when the month is complete – you don’t take your statistics to the bank! But there’s a bigger problem here: Not only do percentages lack value, other than for purposes of analysis, but the analysis is flawed; they’re not only worthless, they’re destructive. Contrary to the reverence paid to sales representatives by well-meaning sales managers everywhere, not only are percentages simply internal statistics that have no real value, these same managers always want the number to be increasing, or at least above a certain level. Rarely do they watch for closing ratios that are too high. But if you’re like Sheila (and many other seasoned sales professionals with closure rates of 50 percent or more), the percentage of deals you’re closing should serve as an indicator that something is askew … that your success rate is simply too high and might need to be intentionally lowered. School vs. Sales As kids in school, when we took a test, most of us expected to get most of the answers right, with scores of 80-90 percent being commonplace. A perfect score of 100 percent was a possibility for anyone who applied themselves. In fact, even when we flunked a test we usually got half of the answers right. And therein lay the difference between school and the real world. In school a 50 percent success rate is failing, but in the real world a 50 percent success rate is outstanding! Consider a baseball player who has hit .500 for an entire season – in other words, one hit for every two times at bat (a 50 percent success rate). Success of this nature is virtually unheard of; after all, no one has averaged over .400 in major league baseball season in almost 50 years. In fact, in major league baseball, career .300 hitters usually go to the hall of fame. The same holds true in the world of selling. In virtually any industry you can name a 30 percent closure rate makes you a superstar! For example, most insurance salespeople (including those who earn well in excess of $100,000 per year) often produce only three sales for every ten calls they make. Getting Into a Bigger Game So, what should you do if your success rate is too high, perhaps 50 percent or even better? Maybe it’s time to get in a bigger game. Maybe it’s time to call on bigger accounts. Maybe rather than taking the quick, “yes”– while it may drive your closing percentage – will do very little to drive sales volume! Maybe you should focus on offering more elaborate packages with more value-added and deluxe options. Maybe it’s time to move from the minors to the majors. As the saying goes, “Easy yeses produce little successes.” It’s time to start challenging yourself by shooting for the moon more often! You might see an amazing thing happen; your closing percent goes down, yet your sales volume soar! About the Authors: Richard Fenton and Andrea Waltz are founders of Courage Crafters, Inc., a company dedicated to helping organizations achieve breakthrough performance. Authors of, “Go for No! Yes is the Destination, NO is How You Get There,” Richard and Andrea conduct workshops and keynote presentations that encourage participants to overcome self-imposed limitations and achieve their full potential by intentionally increasing their failure rate. Clients include Ameriprise, Macy’s, and High Performers International. For more information, visit Goforno.com or call 800-290-5028.