This blog post was originally published by Rekener, now a Brainshark company.
One of the most powerful pieces of information you could find out as a sales manager is your conversion rate from stage to stage on deals.
Why Stage Conversion Rates Matter
Your stage conversion rates provide amazing feedback on the health of the process, and where the bottlenecks are.
Stage conversion rates highlight the places where you need to improve the process, where your product needs work, or where a particular rep needs work.
When looking to improve your sales process, you want to measure the stage to stage conversion rate of your opportunities. For each opp that moves to a particular stage, Stage to stage conversion rate measures the percentage that moves on to the following stage.
For example, if you have 100 opps that moved into Stage 2, and 55 of those made it through to stage 3, your conversion rate from Stage 2 to Stage 3 would be 55%.
Setting Up Process-Based Stages
When you do this exercise, you want to make sure you’re using process-based stages, as opposed to forecast categories. Closing a deal is a process. There are certain things that have to happen every time you close a deal. These are things like
- Qualifying the account
- Assessing their pain
- Demonstrating a solution
- Making your way to a decision maker
- Getting budget
- Negotiating the deal.
Stages should be measuring how opportunities move through your process, not how good reps are at forecasting what they’re going to win. Tying the conversion rates to process is a great way to make sure you’re going to walk away with actionable information.
Stage Conversion Rate Analysis
You want to lay out all your stages, and measure the conversion rate between each one. Doing so will show you some pretty interesting stuff. The data is easy to understand, and you’ll naturally be drawn to the interesting points, like where the lowest conversion rates are. Those are your bottlenecks, and are worth investigating heavily and attacking.
For instance, if most of your stages convert to the next stage at 70%, but moving from Stage 2 to 3 has only a 30% conversion rate, then dig into that part of the process. If Stage 2 means a demo is set, and Stage 3 means the demo was completed, then you need to work on getting people to show up to your demos. Lifting the conversion rate here will have huge benefits downstream, so it’s worth the energy to improve that part of the process
You should also be aware of any stages you have that are abnormally high. If you have stages that convert forward over 95%, then maybe you’re making your process too complicated, and you could bundle that step in with the step before or after it.
Comparing Sales Reps Using Stage Conversion Rates
Another helpful tip here: take a look at stage conversion rates for your best performers, and see how they differ from everyone else. Very frequently, we see that top performers have a different profile. Often, top performers actually have much lower conversion rates than everyone else in the earliest stages of the process. After that, their conversion rates are higher. What this indicates, is that these reps are very good at qualifying accounts early. They don’t put junk into their pipeline — they only put quality in, and those quality opps move through the rest of the stages at high rates.
For example, take look at Bobby below. He has a relatively low conversion rate from Stage 0 to 1. But after that, he converts opps through the rest of the process very efficiently, which means he has the highest overall conversion rate from Stage 0 to Closed Won.
You definitely want to understand this data by rep, and get to the bottom of why reps differ in their conversion rates. Incorporating this into your regular management process is helpful, as you can probe reps to find out why their conversion rates are so low or high in particular stages. Then, as the VP of Sales, you’re equipped to help the team close more business by streamlining your sales process to get quality opps through your pipeline and into deals, quickly.
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