Managing to Average Deal Size

What is Average Deal Size?

While average deal size is well-understood, it is underutilized by companies and managers as a measurement of individual and team sales performance. Average deal size is the average dollar amount of each agreement that is closed during a specific period (month, quarter, etc.). Managers should calculate average deal size for both individual salespeople and the overall sales team to gain valuable insights into performance, including:

  • How effective each salesperson and the team are at bundling or up-selling additional products and services.
  • How effective each salesperson and the team are at protecting price through limited or no discounting.
  • How efficient each salesperson and the team are with the company’s time and resources.
  • How fast each salesperson and the team are at closing deals (view average days to close with average deal size).

For example, Seller A is closing five deals per month worth $10,000 with an average days to close of 25 days. Seller B is closing seven deals per month worth $10,000 with an average days to close of 30 days. Seller A’s average deal size is $2,000. Seller B’s average deal size is $1,429. Even though both sellers are closing the same amount, Seller A is more effective and efficient than Seller B – that is, Seller A is selling bigger deals, faster.

The five key ways to increase average deal size are: 1) Add-ons. Bundle products and services together. 2) Raise prices. Sell the same volume of deals at a higher price. 3) Reduce discounting. Sell value, not price. 4) Sell the upper range. If the customer expresses interest in 25-50 licenses, proceed with 50. 5) Up-sell. Sell the Enterprise versus Professional version of the product. Set an average deal size target and manage to it.

All contents copyright © 2016, Josh Lowry. All rights reserved.

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One Response to Managing to Average Deal Size

  1. Gary John says:

    VERY helpful!

    Like

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