The average deal size with one of our customers varies by 65% for closed won opportunities.
That’s a whopper of a variation.
All salespeople work in comparable territories. They are selling the same products to similar customers.
That means the difference in average opportunity size represents a potential weakness in the sales process of some salespeople.
Our customer, Sales VP Colin Parish, thought: “that’s an opportunity to grow revenue.”
What is the average deal size?
The average deal size metric is a comparison of the size of sales opportunities between salespeople, customers, markets, or other variables. Increasing the average deal size is a powerful way to grow overall sales revenue.
To measure the average deal size in Salesforce in a useful way, you need several reports and dashboard charts.
Keep reading if you want to know EXACTLY how to do this and the steps that Colin took.
Average Deal Size Report
The first step is to create an Average Opportunity Size report in Salesforce.
You might be wondering:
What’s the easiest way to create this report?
The answer is to install our free GSP Sales Dashboard from the AppExchange.
The average deal size report is one of the twelve charts we recommend for effective pipeline management.
Alternatively, you can create this report yourself.
Here’s how the average deal size Salesforce dashboard chart looks:
Furthermore, here’s the underlying report.
The report shows that Dave’s average closed-won deal size is $14,300. This value compares to $8,650 for John. That’s a 65% difference.
However, as yet, we still don’t know what action to take.
For that, we need to dig further.
Average Deal Size Compared to Total Sales
Let’s start putting some context into the numbers.
For example, a sizeable average deal size is no use if total sales are low.
Look at this chart:
Now we can see that Dave not only has the largest average deal size for won opportunities.
He’s also the top salesperson in terms of overall sales.
John is the lowest-performing salesperson. He also has the smallest average won opportunity size.
The overall sales performance of Sarah and Shaun is roughly in line with the average deal size.
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Performance Metrics from this free Dashboard.
Average Number of Products per Opportunity
VP of Sales, Colin Parish, speculated that the average opportunity size correlates closely with the number of products sold on each opportunity.
Specifically, Colin believed that high performers sell many more optional products.
Let’s see if he’s right.
This chart splits the average opportunity size by Core and Optional products.
To create the chart and the report, we tagged each product as Core or Optional using a custom field.
We can see that Optional products contribute 35% of Dave’s average deal size.
In other words, Dave is killing it when it comes to adding ancillary products and services to his opportunities.
The result is a much larger average deal size compared to other salespeople.
Sarah ranks third in terms of average won opportunity size. She’s second in overall sales.
However, we can see the small contribution – less than 5% – that optional products make to her deals. If Sarah can increase the number of optional products that she sells, she’ll be at Dave’s level of performance.
Therefore, as a manager, you can now identify the coaching and training interventions that will help Sarah achieve this.
Compared to Dave and Sarah, the chart is less conclusive for John and Shaun.
They have some way to go to achieve the same ratio as Dave. But perhaps there are other factors also at play? Let’s come back to that in a moment.
Many salespeople find it difficult to use the standard user interface in Salesforce to link products to opportunities.
It’s a problem many people experience. To resolve it, use the GSP Product Selection Wizard.
The Wizard makes it super-easy to find products and add them to opportunities. It also supports product bundles and packages.
The Impact of Price Discounts on Average Opportunity Size
John sure is the leader on this dashboard chart. It’s the chart that shows he gives away a higher proportion of revenue in discounts than anyone else!
Dave and Sarah give away the least amount of discount in percentage terms.
Shaun and John can improve in terms of both optional products and discount giveaways. In our customer, Sales VP Colin Parish is spending time with both to provide coaching and support that will improve their overall sales performance.
Incidentally, we interviewed pricing expert Tony Hodgson at Pricing Solutions. We wanted his experience in helping companies avoid giving away precious margins through discounts.
“Most companies can increase profit by between 2 and 4 percent by doing nothing other than getting a grip on price discounts,” says Tony.
Here are the Ten Tips To Avoid Price Discounts that Tony gave us.
Colin is well on the way to implementing all of Tony’s recommendations.
Colin’s Experience with Average Deal Size
Here are the crucial lessons Colin has applied from looking at average opportunity size.
How many can apply to your business?
1. The average opportunity size is an essential sales metric that gives powerful insight.
2. Don’t use the average deal size metric in isolation. Other reports add meaning to the figures and help you decide what action to take.
3. Tagging products Core and Optional is an excellent way of understanding how effective salespeople are at up-selling.
4. It’s essential to measure price discount giveaways. The ten pricing tips that Tony recommends are great for controlling discounts.
5. Have a range of sales metrics about closed-won opportunity size to give managers the essential information they need. This range of measures and reports means that highly tailored, rep-specific coaching, training, and support interventions are possible.
There are only three ways to increase sales revenue. Increase the size of the pipeline, improve opportunity conversion rates, and increase the average deal size.
Go out and boost your team’s performance and sales revenue 😊.
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