Average deal size is the revenue from closed-won deals in a period divided by the number of deals won in that period.
How to calculate it
Divide closed-won revenue by the number of closed-won deals. Three won contracts of $10,000, $15,000 and $20,000 average $15,000. Leaders use the number to set quotas and to size the pipeline a team needs to hit a target.
Where deal size gets decided
The number is reported at close and decided much earlier. A deal grows to the size of the problem the buyer has put a cost on, in their own words. It shrinks at the discount stage when nobody on the buying side can say what the problem costs, because a price with nothing to measure it against looks expensive.
So the question a manager asks in a 1:1 is short: "What did the buyer say this costs them, and was the signer there when they said it?" Two illustrative answers:
- Good: "Their ops lead said the manual reconciliation costs about two analysts' time a month, and the CFO was on the call where she said it."
- Weak: "They know it's a big problem for them." The rep believes the deal is large; nothing the buyer said supports the price.
Our deal risk guide covers that evidence, and how to qualify out a deal covers the deals that never had it.
A $48,000 proposal, before it goes out
This example is illustrative. A rep is about to send a $48,000 proposal. On a call with Caty before sending it, Caty asks what the buyer said the problem costs. The rep has a pain point and no figure. They plan one more conversation with the operations lead to put a number on the hours lost each month, then rebuild the proposal around that figure so the champion can defend the price to the CFO. The deal is still $48,000. What changes is whether it survives procurement at that size.
Related terms
FAQ
How do you calculate average deal size?
Add the revenue from every deal won in a period and divide by the number of deals won. Use closed-won deals only, and the same period for both numbers. Calculate it by segment too, because one large deal can distort a small team's average.
Is average deal size the same as ACV?
Often close, but they can differ. Average contract value in SaaS usually annualizes multi-year contracts, so a three-year $90,000 deal counts as $30,000. Average deal size usually takes the booked amount. Pick one definition and keep it.
How do you increase average deal size?
Get the buyer to state what the problem costs, in their words, before any price is discussed, and make sure the signer hears it. A stated cost gives the champion something to defend the price with when procurement asks for a discount.