Recent research by GSP with one of our customers showed a 65% difference in the average closed won opportunity size.
That’s a huge variation.
All salespeople are working comparable territories. Selling the same products to similar customers.
So the variation represents a potential weakness in the sales process of some salespeople. And that’s a major opportunity.
So here’s a summary of the investigation.
Average Closed Won Opportunity Size
The first step was to create an Average Closed Won Opportunity Size report.
Tip: To do this, start by creating a matrix report. Assign Opportunity Owner to the left column. Place Close Date (grouped by month or quarter) across the top. Then add the Amount field to the main body, summarized by Average.
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Here’s what the resulting salesforce dashboard chart looks like.
And here’s the underlying report.
The report shows that Dave’s average closed won deal size is $58K. This compares to $35K for John. That’s a 65% difference.
Average Closed Won Opportunity Size Compared to Total Sales
Let’s put some context on the figures. A large average deal size is no good if total sales are low.
Here’s the comparison.
Now we can see that Dave not only has the highest average closed won opportunity size. He’s also the top sales person. To find out the full story on this, read the blog Dave Apthorp: The Best and the Worst Salesperson.
John is the lowest performing salesperson and has the lowest average closed won opportunity size.
The overall sales performance of Sarah and Shaun is roughly in line with average deal size.
Average Number of Products per Opportunity
We spoke to the team manager, Colin Parish. Colin speculated that the average closed won opportunity size is closely correlated with the number of products sold on each opportunity.
In particular, Colin believed that the high performers sold more optional products.
Let’s see if he’s right.
The chart shows the proportion of the average opportunity size in terms of Core and Optional products.
The split between Core and Optional is made using a custom field with these picklist values on the Product.
We can see that a significant proportion (over 35%) of Dave’s average deal size is made up of Optional products. In other words, Dave is doing a great job of adding ancillary products and services to his opportunities. That’s boosting his average closed won opportunity size.
Sarah is ranked third in terms of average closed won opportunity size and second in overall sales. Yet we can see the small contribution – less than 5% – that optional products make to her deals. Coaching Sarah in this area is likely to produce a direct increase in deal size and revenue.
“Sarah has one key challenge – she needs to add more optional products to her opportunities. She’s spending two days with Dave Apthorp, learning from his expertise.”
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 examine that in a moment.
One final point on adding optional products before we move on.
Many salespeople find it difficult using the standard user interface in salesforce to find the right products to add to opportunities. It’s a common problem. Take a look at the product selection wizard to make it easy to identify and add products to opportunities.
Price Discount Impact on Average Opportunity Size
John sure is the leader on one dashboard chart. 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. If Sarah can up her game in terms of the number of optional products per opportunity she’ll be at Dave’s level of sales performance.
Shaun and John can improve in terms of both optional products and discount giveaways. Colin is spending time with both, coaching and supporting them to improve their overall sales performance.
One final thing on price discounts. We recently interviewed pricing expert Tony Hodgson. for ideas on how to avoid giving away excessive margin through discounts.
“Most companies can increase profit by between 2 and 4 percent by doing nothing other than getting a grip on price discounts.” Tony Hodgson, Pricing Solutions.
Here are the 10 tips for controlling price discounts that Tony gave us. Colin is already implementing most of them!
Here are the five lessons Colin says he has learned from looking at average closed won opportunity size.
How many can be applied to your business?
- Average closed won opportunity size is an essential sales metric that gives powerful insight.
- The metric can’t be used in isolation. Other reports add meaning to the figures.
- Tagging products Core and Optional is a really useful way of understanding how effective sales people are at up-selling.
- It’s important to measure price discount giveaways. The 10 pricing tips is a great resource for managing discount amounts.
- Have a range of sales metrics about closed won opportunity size gives managers the essential information they need. With these metrics, rep-specific coaching, training and support interventions can be made.
When all is said and done, there are only three ways to increase sales revenue. Increase the size of the pipeline, improve opportunity conversion rates, and increase average closed won opportunity size.
Go out and boost your revenue! 🙂
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