How it's calculated
Add up the value of every deal you won in a period and divide by the number of those deals. Decide up front what 'value' means: first-year contract value, total contract value and monthly recurring revenue all give different answers, and mixing them makes the number meaningless. Count only won deals; open and lost deals belong in other metrics. Many teams also track the median, because one unusually large deal can pull the average up and hide what a typical deal looks like.
How to calculate it
Average deal size = total value of deals won in the period ÷ number of deals won in the period
Worked example: A rep wins 8 deals in a quarter worth a combined $240,000. Her average deal size is $240,000 ÷ 8 = $30,000.
Example figures only. Use your own numbers.
Check your win rate and pipeline coverage in the cold call calculatorExample
A team's average deal size has slipped for two quarters. Reviewing calls, the manager finds reps offering a discount as soon as price comes up. The team practices the price conversation, asking what the buyer is comparing against before offering any concession, and tracks the average over the next quarter.
Why it matters
Average deal size is one of the inputs that turn a revenue target into a plan. Divide the target by your average deal size and you know roughly how many deals you need to win; combine that with your win rate and you know how many opportunities you need to create. It also explains differences between reps. Two reps can hit the same number with very different mixes of deal count and deal size, and they need different coaching. A falling average can point to discounting, a drift toward smaller customers or proposals that cover less of the problem than the buyer has.
How reps grow it
Bigger deals usually come from better discovery, not harder negotiation. When you understand the full scope of the problem, who else it affects and what it costs, you can propose a solution that matches it instead of the smallest package that gets a yes. Practice the questions that widen the conversation, such as 'Who else on your team deals with this?', and practice holding your price when the buyer asks for a discount, since every unearned concession lowers the average.