How transparent is the productivity of your sales team? Each individual team? Each individual salesperson? Many companies grapple with these questions as they strive to optimize their sales function. No matter the industry, the challenges with generating a reliable Sales Win Rate Metric can be overcome.
The first step is to define the calculation. Once the elements of this basic Metric are identified, you can layer on all of the additional complexities that exist in reality. In its simplest form,
Sales Win Rate = Closed Won / (Closed Won + Closed Lost + Pipeline) *
Here’s an example of how Sales Win Rate and its components can be presented
In order to get an accurate Sales Win Rate, you must ensure that the elements of the calculation are being fully collected and are not being materially manipulated. From here, we will discuss the complexities around each element of Sales Win Rate and suggestions for addressing each one. Depending on the application for the Metric, you can choose to base the calculation on the dollar amount of the Opportunities or on the count of Opportunities.
Pipeline
Pipeline includes all deals which are Open. They are neither Won nor Lost and they represent opportunity for future Wins. This is the Status that all Opportunities start off in. Most companies break Pipeline down into multiple levels or stages to indicate how far along they are in the sales process. For purposes of this calculation, we sum all of the stages together to get Pipeline.
To get an accurate Sales Win Rate, we want to collect all Pipeline Opportunities at the time of fruition. This generates a “Created Date” which will drive our Metric reporting. We must create incentives for Salespeople to enter Opportunities and updates timely. Complimentary Accountable Metrics such as Pipeline Created, Total Pipeline, Stale Pipeline and Closed Won ensure that all Opportunities run through the CRM system in a timely manner and result in accurate Sales Win Rate.
Closed Won
These are the Opportunities which are converted to Revenue. They are often associated with a paper or verbal contract and they should eventually be traceable to an invoice or cash deposit.
The most successful CRM processes include a Control Team at this stage in the process where terms of the agreement are reviewed for accuracy before closing out the Deal. This Team ensures accuracy of the critical elements of the agreement, including Close Date, Total Contract Value (fixed or estimated), and Product or Service purchased. The Control Team can be legal, accounting, sales operations, or some other corporate operations team. This Team serves as a check-point, ensuring that every Closed Won deal is valid, thus preventing manipulation of this Metric.
Closed Lost
These are the Opportunities which are removed from the Pipeline due to loss of a deal. This can take on many forms. Perhaps a competitor won the business, the prospect company was acquired, the product or service is no longer needed, or the company has competing priorities.
The term Closed Lost is a bit loaded because it can imply failure on the part of the salesperson, though this is often not the case. To address this, companies often set up other statuses to indicate ‘Inactive’ or ‘Reprioritized’ to give Sales Reps the ability to indicate reason for the loss. For calculation of the Sales Win Rate Metric, Closed Lost would be the sum of all of these statuses.
Sometimes a Deal is removed because of a mistake, like a duplicate record or an opportunity being added to the wrong Account. Deleting the opportunity is appropriate in this scenario but there should be a process for approving a deletion and it should be managed by a third party, such as Sales Operations to ensure this Metric is not manipulated.
Close Date
Any secure CRM process must provide for locked records and constraints on key date fields. This means that once a Deal is Closed, the Close Date cannot be changed, unless through higher-level approval. It means that Close Dates cannot be back-dated out of the current Sales Year for deals which are Lost. It prevents Close Dates from being forward-dated into periods beyond the team’s scope. This requires comprehensive planning in the set-up of the CRM tool to set up guardrails for data entry and to ensure clean data.
No matter the industry, the challenges with generating a reliable Sales Win Rate Metric are shared. With a strong CRM process, structured tools, and complimentary accountable Metrics, these challenges can be overcome. Email us at info@empowerboc.com to find out more about Sales Effectiveness Metrics solutions.
Melanie Manning is the founder and CEO of Empower Business Optimization Consulting in Atlanta, Georgia. After a 20-year career in corporate finance and operations, Melanie recognized the value of analytics resources who could see the big picture and were also capable of designing and implementing BI solutions. To address the need, she founded Empower to address the needs of the business user through effective storytelling.