Why don’t businesses close more warm leads? In part, they take their foot of the gas too early in the sales process. And lets face it, depending on who you talk to in your organisation, what’s considered a closed deal will differ hugely!
When is a deal closed?
Ask an over eager sales person, business development rep or rookie business owner and they’d likely tell you, “when the client shakes your hand and says ‘Yes’”.
Ask a Sales Manager, or Ops Director and they’ll tell you “when the contract is signed”.
Ask the Financial Controller or Book keeper in the organisation and they’ll say “when the invoice is raised”.
Ask the Entrepreneur or the Senior Leadership Team and they’ll likely say, “when the money is in the bank”.
Ask the Customer and they’ll tell you, “when they’ve received the product or service!”
The challenge is that, closing the sale is not just one single moment in time. It’s a series of steps with a number of touch points and your client’s buying journey is a process throughout your organisation that should be understood, mapped, managed and monitored.
This idea that the sale is a series of steps, goes against the traditional sales philosophy for many, where we were led to believe that the sale is closed in a single moment.
Instead you need to understand the Closing Process of your organisation so you can work out, firstly where it can be improved either through process, automation or improved sales skills, and secondly how to create the sales reporting that works for your business.
3 Stages of Closing
The close can be broken down into 3 distinct areas:
• The Emotional Close
• The Legal Close
• Financial Collection
1. The Emotional Close
The first part of the closing process is the emotional buy-in from the customer. This is the moment when they agree with your ideas, say ‘Yes’ to your proposal, shake your hand (if you are face to face with them), or confirm on email their intention to buy.
If a client is ‘emotionally closed’ a legal close should be offered immediately.
2. The Legal Close
The Legal Close is the point where your contract is signed and the client may initiate their own internal process such as raising a Purchase Order if they need to. These days it’s unusual to walk out of a business meeting with a signed order, it’s more likely you will need to legally close a deal when you are not present with the client.
The between these 2 parts in the Closing Process is the point where most sales are lost. A lot can happen between a client saying ‘Yes’ and then returning a signed contract, so it’s really important to;
a. Make the contract signing process as easy as possible
Use an electronic signing service, which allows contracts to be signed and returned (legally) via email, or include a stamped addressed envelope if sending by post.
b. Offer the Legal close almost immediately after an Emotional Close
Speed is of upmost importance. Don’t make the slow issuing of contacts to your clients the reason for any delay. The legal step in securing the business, if not immediate, should be completed within 24 hours of the emotional close. Statistics show that closing conversion rates fall by 10% for every additional 24 hours that passes between you getting the legal documentation to a client once they’ve emotionally committed. Use templates, (including email templates) so you can turn contracts around almost immediately.
Make it part of your initial closing proposal to give them an incentive for your client to return the signed documentation within a set time frame.
For example, can you offer them some additional value if they sign off before the end of the week? Or, in order to slot their project into your delivery schedule, stipulate you must have their contract signed and returned by close of business the following day.
If they show any resistance at this point, then the deal is likely to fall over and it demonstrates they were never fully emotionally committed in the first place.
3. Financial Collection
Collection is part of the close, and not one that should just be left to your Credit Control Team. A two-way flow on the status of your clients should be shared between the Credit Controller and the sales person/Account Manager.
Ensure you have very clear Terms and Conditions included in your contractual documentation, including penalties for Late Payment.
Consider also building into the contract, favourable payment terms as part of the initial proposal.
When Should You Record Your Sales Figures?
When to consider the sale closed is only the first issue, the second consideration is when to report it, and that again will depend on the purpose of the report and who needs that information. Done well, everyone in the business has the information they need to stay focused, motivated and to make the correct decisions for them – get it wrong and, at best, your team will be de- motivated and at worst, you could hit cash-flow issues.
Here are 3 different sales reports that most businesses need, together with some guidance on who needs the information.
1. Pipeline report
This records all prospect information, including sales activity and percentage likelihood of new deals & forecast close dates.
Used by: The sales team, and their manager to record prospects and future sales forecasts including any emotionally closed, but not yet signed business.
2. Closed sales against target
This records all the sales closed (i.e. legally closed) in that period (usually monthly – although sometimes weekly). These figures are usually compared against the sales target for the month and will be used to measure individual and Sales Team performance.
Used by: The Sales Team and their Manager, usually reported to the Senior Management, and shared with the Finance Team (who will then use for further financial forecasting)
3. Sales against budget & Order Book value report
This is the report that the Senior Team, the bank, and the entrepreneur will be most interested in, as this final report also takes into account when the sales income will be realised which can then be plotted against costs, and from this a monthly profit figure is calculated.
The term ‘Order Book Value’ refers to the value of sales closed, but not yet invoiced i.e. future income. So for example, in the previous report the Sales Team may have recorded new sales of £50,000 but if none of that is to be invoiced for a further 3 months, your Financial Controller needs to plot this against budget in your P&L to understand the implications on cash flow.
Used by: The Senior Team & the Board.
Map the Closing Process of your organisation before deciding how you can make improve each of the 3 parts as well as the transitions between them.
Be very clear, when and to whom to report sales figures and ensure everyone in your team understand when a sale is a sale!
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Nicola Cook is an award winning entrepreneur and twice published international best-selling author on professional selling and personal & business growth. She is CEO of Company Shortcuts, a business devoted to improving business results by injecting skill, passion and strategy to help those entrepreneurs and sales enthusiasts achieve the sales results they desire.