Understanding Your Sales Closing Ratio

Written by Sara McGuire

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Update on June 07, 2023 | 4 minute read
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As a business owner, you’ve probably grown accustomed to measuring metrics with your parts and service department. To get to that point, you must first look to where it all begins, and that’s the initial sale.

 

To get a true indication of how your sales department is doing, you need to know your sales closing ratio. Before you determine your closing ratio, dealership expert Bob Clements advises that you first need to take a look at who comes through your door.

Read Next: Dealership Service and Parts Department Best Practices

There are two distinct types of people which you should be able to qualify within the first 15 seconds of meeting them:

Sales Suspects Percentage

 

Suspects

These are people that have a pulse, but are unlikely to ever become a customer. They like to come into a dealership, kick the tires, and have no need or desire to buy your product. Bob says, on average, 20-30% of the people who come through your door can be placed into this category.

 

 

Sales Prospects percentage

 

 

Prospects
The other 70-80% of people who come through your door are prospects and each has an opportunity to buy from you. While many think that price is the biggest factor in a prospect’s decision to purchase, Bob believes this isn’t the case.
 

 

“If someone comes into your dealership, they are at least neutral in their decision to buy from you, Roughly 20% of people make their decision based solely on price. The rest are looking for something that brings value to them. Often times if they don’t end up buying, the decision is based on the person not liking the dealership or salesperson.”

Evaluating your sales closing ratio

Once you’ve distinguished the prospects from the suspects, you can now work on evaluating the correct sales closing ratio. Clements defines the sales closing ratio as:

How to Calculate Sales Closing Ratio

For example, if you generate 20 sales from 70 qualified prospects who come through your business, that’s a 29% closing ratio. While 29% may seem low, Clements says most dealerships average around the 30% range.

 

Once you have determined what your sales closing ratio is, you can now budget and plan ahead. If your closing ratio averages at 29%, you’ll know that bringing in an extra 3 people a day through the front door of your dealership or about 1,000 prospects can generate another 290 sales each year.

How can you improve your sales closing ratio?

One key area that Bob believes will bring in more prospects into your dealership and can close more sales is branding your business. First impressions can be everything and all too often Bob sees dealerships get caught up in manufacturer branding, which is a distraction from the dealership.

Read Next: 3 Questions to Ask Before Bringing on a New Line

“I believe dealerships have to give themselves a unique identity, Too many dealerships rely so much on manufacturer branding to where they all look the same. If dealerships would just take the time to brand their business and give prospects a unique reason to come into your dealership, you could quickly work that closing ratio number up to 40%.”

One way to help make your dealership unique and more inviting is to turn your showroom into an interactive environment. Invite people to sit on and get a good feel for your products. You can also offer free coffee or popcorn or fresh chocolate chip cookies. The idea is to create a unique and warm environment that anyone would feel comfortable walking into.

Bob suggests another way to improve your closing ratio is by conducting additional training with your sales staff to get them excited about the products you sell. If the salespeople are passionate about the products they sell, customers are more receptive.

Read Next: How to Create the Best Customer Experience

By gaining a true understanding of your sales closing ratio and developing ways to bump that number up, you’ll quickly be able to boost profitability in your business.

Sales Closing Ratio FAQs

How can I improve the sales closing ratio for my sales team?

Targeted training sessions is a proven method to strengthen your sales team's skills in order to increase the closing ratio. Implement efficient sales techniques, offer ongoing coaching and feedback, and make sure the team has the resources and skills it needs to succeed. Additionally, creating precise sales objectives, rewarding performance, and promoting a healthy sales culture can all have a big impact on your ability to close deals.

What role do qualified prospects play in achieving a high sales closing ratio?

The key to getting a high sales closing ratio is finding qualified leads. You boost your chances of closing sales by locating and focusing on prospects who have a sincere interest in and the means to buy your goods or services. Your sales staff will be able to focus on prospects with the most potential by investing time in efficient lead generation, lead nurturing, and qualification processes, which will increase conversion rates.

How can I measure and track closed sales effectively?

Use a powerful CRM system (Like TargetCRM) that enables you to collect and analyse sales data to measure and track closed deals. Insights into important indicators including conversion rates, transaction sizes, sales cycles, and individual sales team effectiveness will be gained as a result. By utilising these measures, you can pinpoint areas that need work, establish reasonable goals, and make informed choices that will increase your sales closing ratio.

What role do service department metrics play in sales success?

Service department metrics can have a big impact on sales success in a few different ways. Increased client loyalty, repeat business, and referrals result from good service interactions and high customer satisfaction, which eventually increases the number of sales possibilities. You can make sure the service department contributes to a positive overall customer experience and indirectly improves the sales closing ratio by keeping an eye on measures like customer satisfaction ratings, service turnaround rates, and service department efficiency.

How do dealership branding and manufacturer branding affect the sales closing ratio?

The branding of both the manufacturer and the dealership have a significant impact on the sales closing ratio. A powerful and positive dealership brand can generate trust, set itself apart from rivals, and draw in more qualified leads, boosting the chance of making sales. The reputation and trust connected to a manufacturer's goods or services are represented by manufacturer branding, on the other hand. Potential clients may feel more confident when dealing with a reputable manufacturer, which makes it simpler for the sales team to close deals. The dealership and manufacturer branding initiatives should be coordinated to produce a potent synergy that improves the sales closing ratio.
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