Closing Ratio is a metric that measures sales effectiveness. Such metrics are used to evaluate a company’s profits, project revenue, and plan for success. Improving your closing ratio means more business and more dollars on your bottom line.
Closing Ratio Definition and Formula
Closing Ratio in the construction industry is calculated differently than in other industries. While in other industries it means the number of closed deals from the total number of engaged prospects, that is not true in construction.
Closing Ratio in construction is NUMBER OF JOBS WON FROM TOTAL NUMBER OF JOBS BID
Closing ratio = (# won jobs / # of jobs bid) * 100
For example, if you bid 10 projects this month and won 2, your closing ratio is 20%.
Assuming you know your closing ratio, let’s look at some ways to improve it.
1. Improve Your Lead Response
The faster you respond to a lead the better your closing chance. For example, aim to respond to questions or requests from your website within 10 minutes or less. Return calls within the hour. Did you know that if you contact a lead within 60 seconds, you have 200% higher conversion rate than the second contact? Companies on average take 15 hours to respond via email and 60 hours to respond via phone. Get ahead of your competition by responding to leads faster than them.
2. Track Proposal Views and Delivery to Increase Closing Ratio
Once you finalize your construction bids and send out a proposal, it’s important to know whether your client received it or not and whether they looked at it or not. When you follow up on your proposal via phone, you will have a starting point for your conversation. If you’re emailing proposals from Outlook or other mailing programs that cannot track this information, you may want to look into a sales CRM solution for contractors that provides this service. They can be fairly inexpensive but put you ahead of the game with the information they provide.
3. Build Trust with Your Customers
While you have a customer on the phone, try to learn as much as possible about their issues, frustrations, challenges, and needs. This way, you start building a relationship of trust and people do business with the people they like and trust. If you become their partner, then you’re more than just a number on a proposal.
4. Spend Time Where it Matters to Increase Closing Ratio
Spend time where it matters to bring up your closing ratio. Following up today on a lead that is not ready to be closed is time wasted. Find out when a decision is going to be made so you can follow up at the right time. Set a follow up date and track your sales pipeline by that date. Also track sales behavior to know who to follow up with. If you know a GC rarely wins work in an area, follow up with the other ones you bid first.
5. Target Your Marketing Efforts
The more qualified a lead is the better chance a salesman has to close it. Poor leads bring down your closing ratio and reflect badly on your sales team. If you have a marketing department, have them qualify the leads. By targeting your marketing activities, you make sure you bring the right leads to your sales team. For instance, your online service forms can collect important information about the prospect’s issue or project so you can qualify leads faster. You can ask what the timeline is to fix a fire alarm system. If the timeline is not acceptable to you, you don’t send the lead to the sales team.
6. Talk to the Right People
The closing rate will increase if you engage the right people. Make sure you send your proposal to the right person. If you’re a subcontractor, target the Project Manager or Project Executive with that GC and not the Estimator. In other words, engage the decision makers. Let’s say you notice a proposal hasn’t been viewed as suggested in Tip #4 above. Make sure you sent it to the right person. Call the main line and tell them you are bidding x project and would like to know who the Project Executive is. You’d be surprised how often they will tell you on the spot whom to contact.
Bonus Tip: Define and Enforce a Solid Construction Sales Process
Defining and enforcing a solid sales process at your construction company can be the missing link in increasing your closing ratio even more. While the sales process steps for the construction sales process are fairly standard, the activities performed in each step, the diligence in pre-qualifying opportunities, the speed and accuracy of estimates and proposals, the number of follow-up touch points, they can all put your construction company ahead of the competition. When you adopt a solid sales process, your sales people are in control and you win more jobs.
Improving your closing ratio is one of the best ways to increase business. Sometimes it is all it takes to increase revenue at your construction company. You may not even need to chase new customers, but simply improve your closing rate with the ones you already have.