Sales Conversion Rate: Essential Guide for SaaS Sales Teams
What Is Sales Conversion Rate?
Sales conversion rate, also known as deal conversion rate, is the percentage of deals that become closed-won compared to total opportunities. As a sales funnel metric, it’s critical to understanding the effectiveness of both sales and marketing, uncovering the reasons behind closed-won and closed-lost deals, and understanding the customer perception of product value.
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The sales conversion rate formula focuses on closed-won deals, but the remaining percentage provides insight into the percentage of closed-lost deals. Further examination of when leads move into the closed-won or closed-lost stage (bottom-, mid-, or top-of-funnel) provides further insights that will guide sales and marketing in larger conversations and decisions around efficiency and strategy.
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How to Calculate Sales Conversion Rate
To calculate your sales conversion rate, divide your total number of conversions by your total number of opportunities, and then multiply that by 100 to get a percentage.
This calculation, integral to your marketing strategy, is beneficial throughout the sales funnel to help the sales team determine why customers get stuck at certain stages. The sales team can then find more effective ways to push customers through to a closed-won deal conversion. The marketing team can also use this metric as a starting point for understanding the quality of leads, SQLs, and opportunities they’re generating. Low conversion rates could potentially indicate misalignment with the company’s ICP, issues with product/market fit, or sub-par efforts at conversion rate optimization across the website.
Why Is Sales Conversion Rate Important for SaaS Companies?
Looking closely at the sales conversion rate throughout the sales cycle not only provides insight into how well marketing and sales strategies are working, but it also helps guide opportunities for collaboration between finance, marketing, and sales. When teams work together, they can better examine the “why” behind the numbers.
Finance can look closely at data throughout the sales cycle to help flag reasons for closed-won versus closed-lost deals. This leads to closer evaluation of marketing campaigns and sales feedback to find opportunities for adjustments in approach. From there, actionable decisions within sales and marketing benefits conversion rate optimization throughout the sales funnel. Even small increases to deal conversion rates (and conversion rates across the entire funnel), can significantly impact revenue growth and lower customer acquisition cost (CAC) per deal conversion.
Real-Time Data Tracking Helped Revenue.io Achieve Strategic Insights
Revenue.io discovered the importance of effectively tracking sales conversion rates throughout the sales cycle after expanding their product line through SaaS subscriptions. Their product expansion strategy was aggressive, and the result was a lot more data to track and analyze. Assessment of new business pipelines, in addition to the simultaneous assessment of the potential for cross-selling, became increasingly complex. Gathering the necessary information manually for analysis, as they’d done previously, became incredibly time intensive.
To optimize data tracking and analysis, Revenue.io had to revamp its data systems and financial analysis tools. First, they needed to ensure that data was easier to access and compile. They also needed a simpler way to turn that data into actionable, SaaS-optimized insights for their product and sales team. Finance had to make these processes faster, easier, and more efficient so teams could spend time accelerating their expansion strategy rather than just gathering data.
As the number of customers and products grew, we were tasked with finding a way to scale our workflows, analyze new business, and expand revenue against our existing base. This puts pressure on finance to find faster ways to deliver insights in support of our vision.
Integrating Mosaic with their Salesforce data helped generate actionable, real-time insights to drive strategic decision-making. Once Mosaic dashboards were integrated, finance was freed from spending 32 hours per month manually gathering and assessing data. The dashboards allowed sales people to forecast revenue more accurately and achieve deeper insights on a number of important sales pipeline metrics. Finance gained visibility into how quickly deals moved to closed-won, allowing Revenue.io to benchmark its sales cycle and examine how changes to the product improved their SaaS model.
Understanding Your Sales Conversion Rate
Even with a good sales conversion rate, knowing the numbers isn’t enough. Examining this metric within the broader context of other sales and acquisition metrics helps the entire go-to-market team understand the “why” behind the numbers and enables you to be more proactive in decision-making.
Is the conversion rate at the top of the funnel showing you that there’s a better way to build customer awareness and interest? The middle of the funnel conversion rate might indicate where sales teams lose efficiency between marketing qualified leads (MQLs) and sales qualified leads (SQLs), and where to redirect their efforts. At the bottom of the funnel, the deal conversion rate can offer vital information about possible improvements to make in the sales pipeline between evaluation and purchase.
While a granular view can help sales and marketing optimize their strategies, even a 30,000-foot view of your sales conversion rate will benefit any revenue forecasting and budgeting process.
Other Important Sales Metrics for SaaS Companies
Sales metrics and KPIs provide the data you need to track the marketing and sales teams’ performances. Diving deeper into other sales funnel metrics and sales performance metrics also offer valuable information about areas of improvement within the pipeline and how they impact other key performance indicators across department and company-wide goals. . Here are some of the important SaaS sales metrics you need to consider to get the most out of your sales conversion rate.
Total and Type of Leads
Tracking lead generation, along with how and when leads enter the sales cycle, helps the sales and marketing teams understand what campaigns attract what type of lead to further define their ICP and buyer readiness. Finance can drill down further to identify where MQLs and SQLs tend to commit or fall off of the funnel, which leads marketing and sales teams into further evaluation of how they may improve unsuccessful or repeat successful strategies.
Opportunities Created
Tracking the number of opportunities within any given period helps fuel sales pipeline projections and predicted revenue from sales conversions. This information is particularly helpful for the marketing department, as they gain a better understanding into the effectiveness of particular marketing and business development strategies.
Average Sales Cycle
Your average sales cycle is one of the key sales performance metrics due to being a strong indicator of revenue generation. Tracking the average sales cycle, or the average number of days between opportunities created and opportunities won, informs your marketing and sales strategies to push customers through the sales funnel.
Average Deal Size
Tracking your average deal size helps identify insights into sales process, pipeline, and team performance. You’ll identify opportunities with a higher chance of conversion and build awareness around qualifying leads. It’s also an excellent predictor of total revenue growth.
Opportunities Won
Compare your opportunities won (or closed-won deals) to your forecasts to see if, and where, discrepancies occur. Major differences between projected values and actual values can indicate areas of improvement in the sales cycle or sales forecasting methods.
Closed-Won/Lost Summary
Tracking the total number of deals won as well as the total number of deals lost paints a more complete picture of sales effectiveness. You’ll get more insight into your sales processes, as well as learning about whether you’ve achieved a successful product/market fit.
Retention and Churn Rates
Tracking churn and retention is vital for SaaS businesses. Monitoring customer retention gives you critical information about onboarding, customer service, and customer satisfaction, while churn allows teams to consider where they need to focus their attention (such as product development).
Customer Acquisition Cost
Tracking your CAC is essential as it accounts for the sales funnel by comparing marketing and sales costs against the total number of sales won. This allows you to forecast future efforts more accurately and ensures that marketing and sales are as efficient as possible so that your monthly recurring revenue (MRR) and annual recurring revenue (ARR) continue growing as expected.
Track Sales Metrics in Granular Detail
4 Methods to Improve Your Sales Conversion Rate
Conversion rate optimization requires collaboration across the company, particularly between marketing, sales, and finance. Here’s how to make the most of cross-departmental collaboration to improve the ecommerce conversion rate.
1. Improve Customer Targeting and Lead Generation
Optimization of higher conversion rates is difficult unless the business can successfully identify and target potential leads using avenues like PPC, SEO, social media, email marketing, and other methods. The metrics you pull together around the success of each campaign allows marketing to understand which campaigns have the most success in turning qualified leads into paying customers, and where there may be areas to cut spend and focus on refining other campaigns.
2. Identify Important Metrics at Each Stage of the Sales Funnel
While most deal conversions take place at the end of the sales cycle, there are opportunities to flag issues in sales funnel conversion rates at all stages. Finance can work with marketing, sales, and product teams to identify the important metrics at each stage of the sales process. This facilitates collaboration between departments to identify best practices and areas to follow-up on and improve for a good conversion rate.
3. Optimize Product/Market Fit
Finance can help identify a number of different metrics that may indicate issues with finding the right market for the product. Look at the sales conversion rate throughout the sales funnel for insights, paying close attention to your closed-won/closed-lost summary. Additionally, examining your average sales cycle, average deal size, and retention and churn rates can give you insights into where the breakdown may be in the market. Departments can then adjust strategies to better serve customers in the target market.
4. Review Your Deal Conversion Rate by Type
Compare closed-won and closed-lost deals to open opportunities to help measure sales efficiency. Work with other departments to look at your average conversion rate and examine the “why” behind the numbers and dig into areas where sales can be converted more effectively. Looking at closed-won metrics by campaign can be a call-to-action to identify successful campaigns so marketing can try to build on that success in other areas.
Get Real-Time Sales Conversion Rate Data in Mosaic
Tracking your sales conversion rate is critical to the success of the business, and finance plays a vital role in accessing and analyzing those numbers. But, without the right tools, just gathering that data can take hours of the finance team’s time, so there’s less time to examine the “why” behind the numbers. Providing faster, more efficient access to important metrics improves leadership’s ability to adjust strategic decisions on the fly and better meet the goals of the business.
Mosaic gives you the real-time information you need about your sales conversion rate and other sales metrics in an intuitive, customizable sales dashboard so you have more time to collaborate with other team leaders. With the help of Mosaic’s sales cycle dashboard, finance can efficiently track and analyze important metrics with customizable financial analytics dashboards. Measure deal conversion rates on a monthly, quarterly, or annual basis and click on specific parts of the chart to dive deeper into the data to see which customers were won or lost. Now you have the ability to sum things up to provide each department what they need to take actionable steps to fuel proactive strategy.
With dashboards like the sales cycle dashboard, you view data at a glance. This gives you more time to collaborate across departments to optimize proactive decision-making and a good sales conversion rate overall. Request a demo today to discover how Mosaic can save you time on gathering and analyzing data by providing real-time access to the metrics you need.
Sales Conversion Rate FAQs
What role does A/B testing play in improving a SaaS company's sales conversion rate?
A/B testing is crucial for SaaS companies as it allows them to experiment with different elements of their sales strategy, from landing pages to CTAs (Call to Actions). By comparing different versions, companies can identify which strategies yield a higher conversion rate, leading to more effective acquisition of new customers and subscribers.
