As a Research Analyst here at InsideSales.com, people expect me to be a bit of a nerd…and they’re not wrong. I love anything related to Star Wars (yes, even the prequels…sort of), and as we crunched the numbers on 9.8 million sales transactions for our latest research study Time-Based Closing Strategies: The High Cost of Procrastination, a thought that often came into my head was a quote from Princess Leia.
If you haven’t seen it in a while, I’ll set up the scene: Leia is being held prisoner by Grand Moff Tarkin and, of course, Darth Vader. As Tarkin attempts to intimidate Leia by bragging about the Empire and their new, planet-destroying weapon, the Death Star, (Seriously, if you haven’t seen the original trilogy in a while, go watch it. It’s so good.) Leia points out an error in his way of thinking.
“The more you tighten your grip, Tarkin, the more star systems will slip through your fingers.”
She ends up being right, of course. As the Empire shows more force, the Rebel Alliance grows, and then we all know what happens next.
Now, what does this have to do with sales? As we studied the sales behaviors of 151 companies across more than 2 years’ sales pipeline data, we saw sales reps really “tightening their grips” on potential buyers to get them to buy on the last day of a month or quarter to help them make quota.
In one sense, it works. They do close more deals on the last day of the month—almost triple what they usually close on an average day.
Buyers and sellers have been playing this game for years, so what’s the downside? Here’s the downside:
On the last day of the month, while sales reps are scrambling to triple the number of deals they close, they’re also causing the number of deals lost to jump by 11.43 times compared to the rest of the month. That’s a lot of deals “slip[ping] through your fingers” every month. The win rate (number of deals closed over the total number of deals in a given period, ignoring those that carry over to the next month) drops in half on the last day.
Another thing that makes that first graph not look so great is what’s happening to deal size. Smaller deals tend to close earlier in the month, and bigger deals tend to close later in the month, but, at the end of the month, the median deal size drops 34.50% from one day to the next. This seems to suggest that reps are so pressured to close deals that they offer extreme discounts on the last day…and buyers know it.
The end of the month is a busy time for buyers too, so if a buyer lets a sales rep push at the end of the month, it’s going to come at the cost of a big discount.
On average, the companies analyzed made $52.99 million in annual revenue from only the 12 days at the end of each month—especially impressive since that makes up 14.7% of their annual revenue from 3.29% of the days in a year.
We looked at a few hypothetical scenarios to see how much more these companies could sell if they didn’t make these end-of-month mistakes.
- Bigger deals: What if you didn’t drop the deal size on the last day of the month? We know these companies can close bigger deals because they do it in the days leading up to the end of the month. For this scenario, we hold all other variables constant and raise the median deal size from what it is the last day ($1,252) to what it is the day before ($1,684). It could result in a 42.10% boost in revenue
- More deals: What if you didn’t drop the win rate on the last day of the month? The average win rate for most of the month is 66.56%. What if we hold all other variables constant and raise the last-day win rate of 33.21% to what it is the rest of the month? This has the potential to double end-of-month revenue (100.55% increase).
- More, bigger deals: What if you didn’t drop either metric on the last day of the month? With the higher win rates and deal sizes from earlier in the month, you could really improve things. In fact, based on our calculations, revenue could increase 184.98% under this hypothetical scenario.
The data showed that there are lots of deals in the pipeline, but this habit of trying to squeeze all of it into the last day of the month, a lot of it is being unnecessarily lost. To avoid this, put limits on end-of-month discounting, be willing to wait until the next month, and incentivize closing throughout the whole month, rather than just meeting monthly quotas.
To learn more about how the end-of-month push may be hurting your business and to learn about weekly and quarterly patterns that we found in this analysis, check out the full report here or listen to the latest episode of the Sales Acceleration Show here.