Small Changes, Big Impact: The Power of Improving Your Closing Rate

Hello and welcome to the show. Today I'd like us to look at how to improve your closing rate. So let's start off by defining what is a closing rate in the 1st place. Now a closing rate is just the number of people who buy or pay a deposit or write you a cheque or issue APO number or whatever it is that you do in your business before revenue comes in. So if you talk to 10 people and then two people buy, then your conversion rate is 20% if you're measuring it in 10s.

But then if we're measuring it in hundreds and you talk to 100 people and then two people buy, then your conversion rate in that case is 2%. So it's not the absolute number of people that you do business with. So it's not about whether you're doing business with two people every month, it's also in relation to how many people came in contact with you for the whole month. So if you do business with two people every month, but then this month 10 people came in touch with you, then your conversion rate was 20%.

But then if next month you do business with two, but 100 people came to you, then you might think business was still the same, but actually it wasn't because your conversion rate dropped from 10% all the way down to 2%. So once again, your closing rate is the number of people who buy, the number of people who pay a deposit, the number of people who send you a cheque, the number of people who pinged you a transfer, the number of people who issue APO number or whatever it is that you have to do before you get the number, the money into your account.

So we take the number of people that have paid and given us a deposit and then we look at that relative to the number of people who came in touch with us in a given time frame. So usually we measure it in 10s or in hundreds. I haven't come across anyone who measures the closing rates in thousands. And that's because when we're talking about conversion rates, we're usually talking about one person and his ability to or his or her ability to close the sale.

So in 10s or in hundreds. And that's how you calculate it. Now, why is this number important? And why do we sales people pay attention to this? If you have a manager, why is your manager interested in what your closing rate is? Excuse me? So the reason why the conversion rate is impossible and sorry, not impossible important. And the reason why people pay attention to this is because it helps you figure out how efficient you are at the sale.

So let's remember the first example that I came up with. If you did business with two people in January and two people in February and you think all is well, actually it's not the case because two people in January, if 10 people came across you conversion, sorry, closing rate was 2 out of 10 is 20%. But then if you did lots of advertising and then 100 people came in in the month of February, but he still ended up doing business with two of them.

In this case, conversion rate has gone down because if the conversion rate was the same and you do business with two people out of 10, when you get 100 customers, you're actually supposed to be doing business with 20 instead of two. So when you look at the closing rates, it's a sign about where there is a problem. So in January the closing rate was 20% and in February closing rate was 2%. That means we need to figure out something is going wrong.

Maybe the advertising is bringing us the wrong number of people, or maybe we need to increase the training of our sales staff so they can learn how to close more deals. It could be a sign that something is going wrong. And so that's the reason why it's important to track these figures. So, you know, how efficient are you at selling and for your manager or for the business owner, the person is going to be able to figure out what is it that is going on?

Why are we losing money? Why are we losing clients? Now there are a few other questions that I'd like to tackle because we measure this in 10s and in hundreds. There are some people who assume that 100% is possible. So let me answer that question. Is it possible to have a closing rate of 100%? The answer is a capital NO. It is not possible to have 100% closing rate, so don't even try. The reason why is because there is no way in the world that everybody you spoke to this week or this month wants what you have.

There's no way that everybody needs what you have. There's no way that everybody can afford what you have. And The thing is, even if people want it, they need it. They can afford it. There's not everybody who is in a sense of urgency and who needs the thing right now. So 100% closing rate is not possible. Even if you sell water, 100% closing rate is not possible because not everybody wants water now. Not everybody needs water now.

Some people can't afford the water that you sell. Even if you sell pure water. There are some people who cannot afford pure water. And then even for the person who wants it, who needs it, and who affords it, sometimes you catch them at the wrong time and there is no urgency. There's a want, there's a need, but they're not that thirsty, so they're just flashy. So 100% closing rate? Not possible. For those of you who are striving for 100%, please forget it.

However, if there is anyone here who has been doing 100% closing rate, that actually is a bad sign. This is what it means. It means that you are so cheap that everybody stops what they're doing immediately and they buy from you because they see that, man, this product is good and this thing is a steal is just of so much value that everybody has to get it right now. So if you're actually doing 100% closing rate, it's a problem.

It means that what you're doing is really, really valuable and the price is so dead cheap that nobody wants to pass off on this offer. They see it and they're like, please give it to me. So 100% is not possible. But just in case you're doing 100% and you feel like you're a superstar, you're actually not a superstar. You're leaving money on the table. So that's on the 100% thing. Then let's see. OK, if 100% is not doable, then of course, of course, the next question is going to be what is the ideal closing rate?

The ideal closing rate, it depends. It depends on your product, It depends on the service, it depends on the industry. Sometimes seasonality might be a factor. It depends on the price, because when you tweak the price, you know, you make it more expensive or you make it more affordable, the conversion rate changes. It depends on who the target customer is. It also depends on the individual ability of the salesman or the saleswoman, the entrepreneur, whoever it is that is doing the selling.

So you can see that the ideal closing rate, it varies. Now let me go back to the pure water thing. The closing rate of somebody who sells pure water in rainy season is going to be low compared to the dry season. So you can see that seasonality is important here in the hot season, you know, after the Hamatan, everywhere is dry, things like that. It's been a very hot day. It's been a very hot week. You're a pure water seller.

Your closing rate is going to be high because all you have to do is just stay in front of the park and shout pure water and then people rush you. The only question to have is, is it cold? But then in the rainy season, everywhere is nice and wet. The place is nice and cool. Your closing rate is going to be low. So I'm just using that as an extreme example just to show how all these variables affect your closing rate. Then of course, for luxury products, you know, it's questionable.

It depends on the luxury product in question, because there are some luxury products that as economic times become harsher, the sales actually increase it. It happens. And then there are some luxury products that when there's a slowdown in economic activity or maybe when you think you're in a recession or things like that, that the consumption of those things goes down. So you can see that closing rate depends on the number of factors, but you can use Google ChatGPT or whatever and try to figure out what the optimum rate is for your business or for your industry or for your country or for you.

Get what I mean, the particular context. And then you'll be able to judge based on that whether you're doing a good job or not. Now, what's the best way to use the closing rate? If we're able to figure it out, The best way to use it is, first of all, you need to figure out what your closing rate is now, then start trying to improve your business processes so that you can get your closing rate up. My assumption is that your product or your service is already fine as it is because sometimes improving the product might help.

But let's just assume that there's no problem with your product. Your product is international. It's up to par. You're going to try and start improving your business processes. What's your what's your sales training like? What is your marketing like? What selling frameworks are you people trying to implement? What is your customer service policy and processes? You know, those are the sorts of things that you tweak that can move your conversion rate up or move your sorry, not conversion rate, your closing rate up or closing rate down.

Sorry, forgive me because I keep saying conversion. And that's because the last couple of podcast episodes were devoted to conversions. So this is your first time listening to the show and you've been wondering, this guy keeps saying conversions even though you should be saying closing. What does conversion mean anyway? All you have to do is listen to the last three episodes, I think, and you get caught up to speed what a conversion is.

But conversions ultimately lead to closing. So that's how they related. So if you're able to figure out the business processes that you can tweak, you're going to find that even if you make minor improvements, small improvements in the closing rate, it can usually lead to huge improvements in revenue. Because you find that there are a couple of us, a bunch of you listening to this podcast who your profit margins are high.

So let me use another over at least some simplistic example. If you speak to 10 people and then you close three deals out of that 10 and each person gives you a profit of 100K, then your profit for that month IS300K at a 30% closing rate. So let me repeat if my mouth is wrong, no problem. Eventually you run into my math teacher. You tell her she didn't do a good job. So if you speak to 10 people and you close three of them in a month, each person giving you a profit of 100 KA profit IS300K

for that month and your closing rate was 30%. But if you increase your closing rate by just 10%, that is instead of closing three, you close 4, you get an extra 100K per month. So that is the reason why businesses hustle and struggle to get closing rate from 3% to maybe 3.5, because that 3.5, if you're looking at in terms of percentile, that is just .5. But .5 actually translates to 10s of thousands or hundreds of thousands or 1,000,000 by the time the money enters your account.

So it's a big deal. If you go from 3% closing rate to 3.5, it'll be fantastic. If you go from 3% closing rate to 6% closing rate, it will be absolutely fantastic. Your business partners will be happy, your wife will be happy, your spouse will be happy, your kids will be happy. That's if you choose to spend the money on them. And for those of you who had side pieces, your side piece is also going to be happy. So how do we increase the closing rate?

Because that's what this whole podcast is about, right? At least the next couple of episodes. Some of you are going to assume that the answer when it comes to increasing your closing rate is to learn how to close the deal, which is what lots of you are focused on. Lots of you will wake up and think, how can I close more deals? How can I close more deals? Unfortunately, the answer is not in learning how to close the deal.

If you want to increase your closing rate, the answer is not to learn how to close the deal. Let me say one more time, you want your closing rate to go up. The answer is not to focus on the art of closing the deal. If you want your closing rate to go up, the answer is to learn how to open deals better. If you open deals the right way, your closes go up. Let me repeat that again. If you open deals the right way, your closing rate is going to go up.

For those of you who are focusing on close the deal, close the deal, the out of the close the out of the close, you're going to end up becoming pushy. You're going to end up becoming rude, impudent, what else? Obnoxious, all kinds of things. Because you're going to be bye bye bye bye bye bye bye and bye bye bye. I'm being rude, I'm being torn. Deaf actually makes your closing rate to go down. So if your closing rate is currently 30% and you get into that bye bye bye bye bye bye obnoxious tone deaf mode, your closing rate will actually fall.

But if you learn how to open your deals better, then your closing rate is going to go up. And then plus it also preserves your reputation, which is not a bad thing because you don't want to go around trying to do business with people. And then people will say, ah, see him, see him, see how, look at how that's came in. That's how that's by your, they've come again. And of course, we don't want that. So how do we learn how to open deals better?

We're going to get into some more of those details from tomorrow's episode onwards. So for now, that's all for today. Please connect with me on WhatsApp. The phone number is 08064662140. The country code is +234. Also connect with me on LinkedIn. My name is Tava Shima Ayede, you can confirm the spelling of my name. So you can find me from the link where you're currently listening to this episode. My e-mail address is going to be there.

Oh, and by the way, I've been chatting with someone who's a podcast listener already giving him a shout out, so no need to repeat his name again. But he seems to think that I'm a catfish person. I like catfish. I realized that that's because I keep talking about catfish all the time. But sorry, I might have given some of you the wrong impression. I actually do not like fish, and I have had allergic reactions to catfish.

It's just that, unfortunately, I married a woman who is in love with fish. She likes her shrimp. She likes her panda. She likes her ice fish. She likes her octopus. She likes her snail, she likes her crab, she likes her whatever it is. If it is seafood she likes it. Now my mom is also that kind of person too. If it's seafood she loves it. Even if it's shark fin, she will eat it. My in laws happen to be fish people. I am surrounded by fish people and every single time we go on a holiday it turns into a fish fest.

The last time when I been wasted, my in laws were there and or like air catfish this size, this amount. Please let's have some more. So my last Christmas holidays, I was surrounded by fish. And I just thought that that would be a good case study to start expanding upon some of the business principles, the sales principles that we talk about over here on the show. Which is why from December last year, I used a couple of catfish people.

You know, people want to open fisheries and stuff like that. It's just convenient because I happen to be surrounded by fish lovers who are enjoying themselves eating peppered catfish and grilled catfish and other kinds of varieties of catfish. So it's not that I love catfish, I am just surrounded by fish lovers. But it got me thinking, I guess it's time for me to look for other examples to start fleshing out the principles that we talk about over here on the broadcast.

Eventually, I'll think about something else. But when I talk about catfish and I talk about and I relate you to the business principles, I'm just trying to show that all the things that we talk about here on the podcast work and they work for you. No matter your class. If you're a catfish seller, it will work for you. If you're thinking of entering the fintech space, it will work for you. If you sell cars, it will work for you.

If you are one of these fraudsters who opens an evangelical church branch, it'll work for you too. So the point I'm just trying to say is it'll work for anyone. So that's why I talk about catfish people, and that's why I talk about our fintech brothers and sisters, just to show you that no matter where you fall within the gamut, it'll work for you. So I'm not a fish lover. For those of you who think I'm in love with fish, just in case some of you come to an event and you want to Take Me Out, you want to give me a good time,

please let us go to a joint where they sell nice, cool beer and where they sell nice peppered meat, Hastun, all those sorts of things. That's my jam. Unfortunately, one of my speaking engagements, there was a cardiologist there. So I told her that look, by the time we're done, let's you know, I know that you you're a club person. So Take Me Out now. Show me Lagos. Let's enjoy, let's eat as soon and let's drink some beer.

And she was like, you know, you're talking to a cardiologist, right? I'm like, yeah, I know you're a cardiologist. So what gives? She said, look, as soon is not good for your heart because cow is blah, blah, blah, goat is this, this, this vegetable oil is blah, blah, blah, blah, blah. Beer is not good for your heart because alcohol this, this, this da da, da, da, da da. And the bottom line is I didn't get the as soon.

So the moral of the story here is if you want to have a good time, don't hang out with cardiologists. They're going to tell you that everything is bad for your heart and you're going to have a very bad evening. So thank you very much, guys, for listening to the show. I'll catch you guys at the next episode.