The missing metric?
The win ratio (the percentage of bids won to those submitted).
Without knowing your win ratio you don’t know how well you’re selling. That’s important when a sudden loss of customer revenue sends you running to bring on new business fast.
A cynic might say that “as long as revenue rises who cares?”
Anyone involved with, or responsible for sales should care. Here’s why.
Rising revenue happens for many different reasons, and they’re not all a sign your sales efforts are working, such as:
- Winning 1-whale sized contract but losing most others
- Current customer expands, handing you large contracts
- Competitor goes out of business and customers have no one else to go to
The above situations are great, but can you rely entirely on them for your new business?
Why is the win ratio missing?
Sales people always report a WIN. Of course they would, a WIN generates commissions.
However, sales people rarely report LOST bids. They believe (rightly or wrongly) that tracking the win ratio reflects poorly on their performance.
And that’s the crux of the problem. Sales people would rather leave a bid as PENDING rather than say it’s LOST. Even though that outstanding bid reaches a year old.
Sales people are notorious for being overly optimistic, but what about management?
I’m at a loss as to why management doesn’t calculate the win ratio.
Doesn’t sales management warrant the same rigor as operational management? What service contractor doesn’t know its profitability – its win ratio of profits to expenses?
Easily Finding the Win Ratio
The number is simple. There are only 3 states: WON, LOST or PENDING.
PENDING bids, those awaiting a decision should be reported as LOST 90 days after submission.
Waiting 90 days is a practical length of time to truly wait for a customer’s decision. If a bid is WON after 90 days, pricing would most likely have to be reviewed and possibly revised.
If you have many sales people you can easily automate the 90-day PENDING to LOST reporting. Then you’ll have that valuable win ratio.
If you’re managing yourself or another sales person, incorporate that change manually into your own sales reporting. You are measuring your sales effectiveness, right?
Once You Have the Win Ratio
Monitor and compare it as it changes:
- This month to last
- This month to same month last year
- This quarter to last
- This quarter to same quarter last year
- Year to date this year to year to date last year
After that quick look you’ll know whether you need to do anything about your sales effectiveness.
It’ll become part of your sales management, just as important as your profit margin.
How are you determining your sales effectiveness?