06 October 2006

The win / loss ratio

Businesses can become so focused on the outer reaches of their sales pipeline that they can lose sight of their efficiency in closing sales at the last stage - the win/loss ratio. While every element of bringing people into contact with the company is important - unless you can convert people that get interested in the business into buyers then investing more in bringing more people into the funnel isn't going to improve the economics.

This problem is common to virtually every business I have encountered but it is easy to forget to focus on win/loss when other operational problems have to be solved day-to-day. Win/loss needs to be analysed and researched and the drivers of what makes it move in one direction or another need to be understood. You will never have perfect information, but then your client or customer rarely has it either.

When people talk about win/loss ratios they tend to believe that higher is always better, but that is true only up to a point. Once the basic economics in the business seem to be acceptable, then it is time to get really scientific and start to look at the quality of the business that is being won. Quality isn't talked about much, but there is no doubt in my mind that lifetime value of the client or the customer is a pretty effective measure.

Quality is always in fashion. Earlier this year I met the owner of medium-sized business who claimed that he closed 90% of the people who came to him. That's great, but not all those customers, or clients in his case, represent the same economic opportunity to him - it's probable that improved targeting would help to refine the type of people who come to the business and improve the overall quality of his revenues.

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