Opportunity conversion rates are a critical sales metric in any organization.
That’s because when all is said and done, there are only three ways to increase revenue.
- Grow the pipeline.
- Increase the average deal size.
- Increase the opportunity conversion rate.
Of course, they’re all important.
However, in many businesses, a small improvement in conversion rates will yield a disproportionate increase in sales revenue.
Also, measuring opportunity conversion rates (or win rates, if you prefer) helps identify ways to improve individual salesperson performance.
However, like many other Salesforce dashboard charts, the opportunity conversion rate graph doesn’t give you the answer.
Instead, it tells you what questions to ask.
Nevertheless, be careful.
An over-emphasis on opportunity conversion rates can destroy pipeline visibility!
And what’s more:
There are right and wrong ways to measure opportunity win rates.
Naturally, I’ll explain the correct way.
How to measure opportunity conversion rates
Like most things, there’s more than one way to calculate opportunity conversion rates in Salesforce.
Don’t measure conversion rates like this
Sometimes people try to measure win rates in the context of the total pipeline.
In other words, the conversion rate is the value of closed-won deals in a month as a proportion of the total open pipeline.
However, I think this gives a distorted win rate.
For example, let’s say your sales cycle is three months.
A deal created today is unlikely to close for another two to three months. So why is it relevant to the opportunity conversion rate for this month?
What’s more, if the sales team closes the usual number of deals this month, but also does a great job of creating new funnel, the win rate is artificially low. Those new opportunities have dragged down the conversion rate.
Unfortunately, this perception of a reduction in the win rate might lead to all sorts of inappropriate management actions.
The correct way to measure conversion rates
Let’s keep it simple.
The right way to measure opportunity win rates is to compare the number and value of deals won in a month with the number and value of deals lost in the same month.
There’s no debate about whether to include some parts of the pipeline or not. And it avoids the risk of double-counting open opportunities from one month to the next.
Here’s an example of an opportunity conversion rate report in Salesforce.
The chart shows the right way to calculate the win rate metrics. It measures the ratio of won to lost deals each month.
The pipeline, including deals that get pushed from one month to another, play no part in calculating the conversion rate.
Measure conversion rates by value and number
Specifically, our dashboard chart shows the conversion rate in two ways.
- Won % (Count). This metric is the percentage conversion rate in terms of the number of won opportunities.
- Won % (Amount). This metric is the percentage conversion rate in terms of the total value of won opportunities.
Here’s a significant trend in the chart.
The chart shows that in three months – July, August and October – the conversion rate by Amount was higher than the win rate by Count.
That’s probably a good thing. It means that more high-value opportunities were successfully closed compared to lower value opportunities.
In September, the trend reverses. It appears more low-value opportunities closed successfully. That’s something we’ll want to investigate.
The overall opportunity conversion rates are around 35% in this company. Two months – July and October – exceed 40%. That’s quite high. Is it a good thing? Perhaps. Let’s investigate further.
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Salesforce Opportunity Conversion Rate Report
Here’s the report for the chart.
In addition to the Won % (Count) and Won % (Amount), the report shows:
- Sum of Amount. The total value of Closed-Won and Lost deals in the month.
- Sum of Amount Won. The value of Won deals in the month.
These additional metrics are useful because they put the opportunity conversion rates into context.
For example, Shaun Yates has a 100 percent opportunity conversion rate for October. On the other hand, the Amount Won is only £5,000 – that’s small compared to the total value won by other salespeople in the month.
How to interpret the opportunity conversion report
Like any other Salesforce report, we need to know how to use it.
Here are five insights we can gain from the report above. Don’t forget we need to validate each idea through further reports and investigation.
- Dave Apthorp focuses on higher-value deals. Dave’s Won % (Amount) is consistently higher than the Won % (Count). A previous blog post tells us why that is. Dave featured in the post, The Best and the Worst Salesperson on the salesforce dashboard. It turns out that Dave puts all of his eggs in the two or three biggest deals each quarter. He virtually ignores all the rest.
- John Davies has the lowest opportunity conversion rates. On the face of it, John will benefit from coaching that will improve his win rates. But we need to check that there isn’t more to it than just that. Is John focused more on new rather than existing customers? Is he operating in a new market? Or is he converting Leads into Opportunities much earlier than other salespeople and then qualifying them out at an early stage?
- Sarah Watson focuses on lower value deals. Sarah’s opportunity conversion rate is much better in terms of Count than Amount. Potentially she needs guidance on her approach to opportunity prioritization. Alternatively, she needs coaching and more experience in handling large deals.
- Consistently, Shaun Yates has the highest opportunity conversion rates. Does this mean Shaun is a superstar salesperson? Perhaps. But his full-year conversion rate of 55% is suspiciously high. Potentially Shaun is keeping opportunities out of the pipeline until he’s confident that a deal is almost certainly on. Reviewing the time in stage velocity metrics will help determine this.
Take care in using opportunity conversion rate metrics
Analyzing opportunity conversion rates is an effective way of identifying the actions that are needed to increase sales performance.
However, be sure to use other reports and dashboard charts to validate the insights. Above all, take care not to promote the very behavior that will reduce pipeline visibility.
I’ll explain why.
- Sandbagging: This occurs when salespeople deliberately keep deals out of the sales pipeline until a positive outcome is likely. In our example, we might suspect Shaun of sandbagging. How do we know? Well, his conversion rate is very high. Perhaps he’s a fantastic salesperson. Alternatively, maybe he only introduces some deals into the pipeline when he’s confident of a successful outcome. The impact is to boost opportunity conversion rates. However, the result is that managers lack full visibility of the sales pipeline and sales performance.
- Pipeline over-inflation: This is the opposite of sandbagging. Deals that are well past their sell-by date never get closed. There are many reasons why deals do not get closed out of the sales pipeline. For example, over-optimism that a deal, one day, the opportunity will close successfully. Or fear of repercussions when deals are closed out as Lost. And an over-reliance by the management team on opportunity conversion metrics.
Again, the result is to distort funnel visibility.
Use opportunity conversion to increase sales revenue
So let’s say we’ve done our investigation. We’re happy with the numbers.
Here are seven ways that opportunity conversion rates can be used to boost sales revenue.
- Opportunity qualification: Low conversion rates are not necessarily a bad thing. As Bud Suse points out, there’s no point expending a lot of time and effort on a deal only to come a close second. Far better to create opportunities at an early stage while you investigate them. Then qualify-out those where you have a low chance of winning.
- Share and learn: Identify the salespeople with high opportunity conversion rates. Share and learn from their experience and spread this expertise across the team.
- Teach: Train and coach individual reps on how to improve their opportunity conversion rates.
- Territory analysis: Compare conversion rates across territories. Identify and share lessons across regions and areas.
- Customer types: Optimize sales revenue by adjusting the balance of effort between new and existing customers.
- Value proposition: Test the impact of different marketing campaigns and go-to-market strategies.
- Funnel leakage: Use conversion rates in conjunction with Leaking Funnel reports for an understanding of how and why deals are lost from the sales pipeline.
The opportunity conversion rate is a powerful sales metric. Use it (don’t abuse it) to increase sales revenue in your business today.
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