According to CSO insights 21.3%1 of forecasted deals in a typical sales funnel end in “no decision”. This is a number that should send chills down the spine of every Board member, the CEO and especially Sales leadership. The potential lost revenue and gross margin is staggering. Here are some numbers to ponder. These came from a recent telephone conversation with a company executive.
Background
The company is a mid-size firm that sells capital equipment and some consumables. They have 155 sales representatives, and sellers have an average quota of 1.8M each.
Background Sales Data
The table below shows that their sales quota for the upcoming year is $280M. They currently have $700M of sales opportunities in their funnel. Each sales opportunity is worth about $200,000 in revenue. This means that on average each sales representative needs 9 deals to make their number.
The Bad News!
While we never like to focus on the negatives, this table shows the harsh reality. This sales force while winning 40% of their sales opportunities is also losing 40% and having 20% go to No Decision. Here is the math for our sample company. At plan this organization will earn $280M in revenue. It’s important to note, however, that they will also lose $280M to competitors and $140M to No Decision.
To place this into perspective look at the financial impact that can be achieved if the organization can take aggressive and measurable steps to reduce the loss rate or No Decision percentage. The revenue won and concomitant increase in gross margin is significant with modest improvements.
Parting Thoughts
Every organization should celebrate when they make their annual number. It’s an accomplishment that should be acknowledged and rewarded. Organizations would be wise, however, to also measure their loss rate and percentage of No Decisions and take proactive measures to improve them. A slight reduction in the loss rate or minor improvement in the No Decision rate can drive significant revenue and gross margins to the company. There are many paths to improving sales productivity. Start now and reap the benefits.
Reference
- CSO insights 2017 World- Class Sales Practices Report
If you enjoyed this post, please share it with your social network and connect with us on:
- Blog: https://strategicdynamicsfirm.com/blog/
- LinkedIn- Tom Williams: www.linkedin.com/in/thomasjwilliams
- LinkedIn- Tom Saine: www.linkedin.com/pub/tom-saine/94/3a/7b6
- LinkedIn Publisher: https://www.linkedin.com/today/author/8734131
- Twitter: https://twitter.com/sd_firm
Photo courtesy of Google Images.
©Strategic Dynamics Inc. All Rights Reserved. 2018.
