Assessing the probability of winning the deal

# 49 June 2016

To predict what sales people will sell the coming month, quarter or the rest of the year is a recurring and central task when managing a sales organisation. One way of approaching this task is to evaluate the business opportunities the sales people are driving and to assess the probability of them winning their cases. This, however, is not an easy task.

There are two ways of making this assessment: a subjective way and a more objective one.

Subjective assessment

A basic form of assessment is to let the sales people estimate the probability of winning the deal based on their knowledge, experience and intuition. This can work well especially if the manager can verify these assessments applying his or her own experience when discussing the opportunities with the sales person. One should be aware of the following pitfalls when using a purely subjective assessment:

Objective assessment

Professional sales organizations accumulate and use data to calculate the likelihood of a business opportunity moving from one step to the next and eventually becoming an order. This is sometimes referred to as conversion rate or success rate. For example, you can calculate the percentage of the prospective customers that receive a demonstration of the product, or the percentage of the deals that will be won in the final round. Linked to this you can then standardize the probabilities of winning the deal based on where you are in the sales process. As an example, when customers have received a demonstration of the product, the probability of them buying the product is 60 % (based on past experience and statistics from the CRM system).

This method has a clear advantage over the intuitive / subjective method. The tactical element falls away and you get a consistent assessment of all business opportunities.

This approach works especially well for larger sales organisations where it is possible to produce statistics from a large number of salespeople and sales projects.

Below, an example of how an objective assessment model may look like with standardized probabilities for the different stages of the sales process:

20 % The customer has the budget to buy and is talking to us.

40 % We have submitted a proposal and believe that we are on the “short list” – we are one of three potential suppliers.

60 % We are number one on the “short list” – the customers have expressed that they want to buy from us.

80 % We have a “handshake” – we agree on everything, only formal orders (contracts signed) missing.

100 % Orders / contracts signed.