Understanding “Closed Lost”
[Originally posted November 21, 2018; updated July 10, 2024.]
A few weeks ago, Tom Tunguz published a post titled, “Do You Lose Sales Opportunities Because of Sales Execution or Product Insufficiency?” Reading it reminded me of an exchange with two Smartling advisors many years ago on the topic of why opportunities are lost. They said:
There are only three possible reasons for losing a real opportunity. The first is that you were missing product features. The second is that you were beat on price. The third is that your rep f----d up. If it isn’t one of these reasons, the opportunity wasn’t real in the first place.
I love the matter-of-factness of this framework, which makes it almost impossible to hide from or try to explain away a loss. The prospect demanded features that you think made no sense? You were missing features, end of story. A gatekeeper treated you unfairly? Your rep was bested by a competitor who was able to avoid being blocked!
The exchange prompted me to create a workflow in our CRM to capture the reason for each lost opportunity: Missing Features, Beat on Price, or Outsold (my polite label for “rep f----d up”). To this list I added Poor Qualification (“the opportunity wasn’t real in the first place”) and Exogenous Event (e.g., the prospect was acquired during the sales cycle, which happens with surprising frequency).
Missing Features maps to Tunguz’s product insufficiency and Outsold maps to sales execution. Tunguz’s post doesn’t specifically address price, which is a component of product/market fit (product insufficiency) but also a lever that sales can pull, at least to some extent. Particularly for startups in new markets, I prefer to track Beat on Price as its own value.
With regard to being Outsold, there are two underlying possibilities. The first is that you failed to convince the prospect that adopting/switching to your product is preferable to their status quo (let’s call this “Unconvinced”). The second is that you did convince the prospect of this, but didn’t de-risk the adoption/switch in their mind to the extent that it was palatable for them to make a purchase (let’s call this “Risked Out”). The fixes for these two possibilities are fundamentally different.
Our CRM sends an email notification whenever an opportunity is lost. The notification can be targeted based on reason, e.g., Missing Features can go to product; Beat on Price can go to whomever sets pricing; Outsold can go to sales management; and Poor Qualification can go to marketing. In other words, each reason can have an owner.
Of course, this is reactive; the best way to prevent an opportunity from being lost is to ask for help at the first sign of trouble. Someone in the company can probably help to flip trending-towards-lost to won.
Losing an opportunity is expensive, and often demoralizing. You owe it to yourself to apply a rigorous process to understanding the reason for every lost opportunity so that you can improve for the future. This framework has been helpful for Smartling; hopefully it will be for you, too.
