There are a lot of important metrics for agencies to track, and monitoring them is key to optimizing how you close deals. Your agency’s sales closing ratio is one metric that can tell you a lot about how effective you are at onboarding new clients — or converting qualified leads into new clients.
In this article, we'll cover everything you need to know about the sales closing ratio metric, including how to calculate it, the average sales closing ratio by industry, and five proven closing techniques to help you improve your sales closing ratio.
What is the sales closing ratio formula?
You can calculate your agency’s sales closing ratio using a quick and simple formula. All you need to do is take your number of closed deals and then divide that figure by the number of leads you generated within a certain period. You then multiply this number by 100 to achieve a percentage, and the percentage you get is your agency’s sales closing ratio.
Let's look at this formula in action: If an agency has 200 prospective client leads in a year and closes 40 deals from those leads, then its close rate for that year would be (40/200) x 100 = 20%.
What's considered a good closing ratio?
What constitutes a good sales closing ratio ultimately varies from industry to industry and can even vary from agency to agency. For instance, an agency that provides high-profile public relations will generate millions of dollars in revenue with a much lower closing ratio than an agency providing creative branding services for small businesses.
With that said, looking at sales closing ratio benchmarks can still be helpful since most agencies will fall much closer to the average than our example above. A general rule of thumb is that a sales closing ratio of 20% is considered average, while a 30% or higher ratio is considered best in class.
Why determining your agency’s sales closing ratio matters for your brand
Qualified leads are an invaluable resource for agency owners, and this resource is always finite. If your agency isn't converting as many of those leads into clients as possible, then you’re missing opportunities. Examining your sales closing ratio can often provide insights into improving your closing techniques and, thus, your conversion rate.
Along with telling you about the quality of your leads and how effective your account executives are, your sales closing ratio can also tell you about the quality of the new leads you’re generating. For example, if your business development team is breezing past their lead generation quota, but those leads aren’t converting into clients, then the issue could lie with the leads themselves. In some cases, it could be that the client doesn’t fully understand your agency’s offerings or aren’t convinced of your value add for their business.In others, it may merely be insufficient budgeting or staff available on their end to facilitate onboarding.
Failing to monitor your agency’s sales closing ratio can cause a variety of issues to go undiscovered. If revenue alone is all you track, then you are bound to miss opportunities to improve your closing process and onboard more clients — which limits your growth and bottom line.
Best practices for improving your agency’s sales closing ratio
Sales closing ratio is a vital KPI to track, but the whole point of tracking KPIs is searching for opportunities to improve them. If you want to close more deals and scale your agency, here are five effective sales tips for improving your sales closing ratio:
1) Choose the right project management and communication tools
Improving your sales closing ratio is an agency-wide effort that requires the collaboration of your account executives, business development reps, and project teams. With a high-quality project management platform like Teamwork, you can facilitate effortless communication not only between your teams, but between your agency and its clients. This gives your current clients instant visibility into how projects are progressing — and it’s a great perk to highlight with potential clients!
2) Make sure your account executives have a deep understanding of your services
Your ability to convert a lead into a client is only as good as the closing party’sknowledge of your agency’s services. Often in agencies, the person responsible for closing the deal is the agency owner — however, some have on-staff business development reps responsible for bringing in new business. You could have a toolkit of fantastic closing techniques, but if your team comes across as anything less than experts in your field, you’ll have a hard time closing deals.
When it comes to agency knowledge (along with all the other important skills and information your closing team needs), thorough training is the key. Make instilling a deep understanding of your agency’s offerings a priority when onboarding new business development reps and account executives.
For agencies offering more technical services, it may also be beneficial to involve team members who have a hand in day-to-day client projects. This way, your closers have direct, expert-level knowledge of your agency’s daily operations and can leverage it when speaking with potential clients.
3) Stay in tune with your market
Lead quality is one important pillar of a good sales closing ratio. If the leads your team generates don't reflect your agency's target clientele, then it will be hard to convert them.
You must have a deep understanding of who your client is, their pain points, and how your agency can solve them better than the competition if you’re going to close deals effectively.
Ongoing market research, including careful careful analysis of your client data can help you better understand how your services can speak to new clients. Then, you can adjust your pitch and closing techniques to accommodate their preferences.
4) Analyze your historical closing data and prioritize leads based on your ICP
One of the most actionable tips for improving your sales closing ratio is to prioritize leads based on how well they match your agency’s ideal client profile (ICP). Your ICP should outline what type of client would benefit from your agency’s services, rather than describe a “dream” client.
Include quantifiable information in your ICP, like the company’s industry, valuation, annual revenue, number of employees, and geographical location. However, it’s also helpful to include a professional profile that outlines who you’ll speak to at the company — their title, responsibilities, skills, and who they report to.
By analyzing your past closing data, you can create an ICP that reflects the type of lead most likely to convert. Then, use it to guide your lead qualification process to ensure that you use your time and resources wisely. For example, if you find that you close the most deals with companies in the technology industry, prioritize those leads. Or, if you’ve had the most success converting businesses with between 50 and 100 employees, it makes sense to continue pursuing new clients of similar size.
Your team has limited time and resources, and focusing these limited resources on the right leads is vital for successful conversions.
5) Focus your efforts on worthwhile targets
It’s great to shoot for the stars, but as an agency owner, it’s also critical to know when a lead isn’t worth pursuing. Sometimes, eagerness to onboard a dream client may cloud your judgment.
Remember: Your time and resources are valuable, so know which red flags can signal that a potential client probably doesn’t intend to convert. Here are a few common ones:
Only interested in discussing pricing rather than benefits or value
Constantly no-shows for meetings or calls
Not sharing key information with you (including feedback)
Unwillingness to provide concrete project start dates or timelines
Find out how Teamwork can help your agency close more deals
When it comes to gauging the effectiveness of your agency’s overall sales cycle, few metrics are more enlightening than your sales closing ratio. By working to boost this ratio as much as possible, you can ensure that your teams are aligned and optimized toward the common goal of closing more deals and bringing on more clients.
Effective project management and team communication are among the most impactful keys to improving your sales closing ratio. If you want to get started using the best project management and team communication platform on the market to organize your closing efforts, be sure to sign up for Teamwork today!