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How long is your Average Sales Cycle?
The length of your sales cycle has a direct impact on many aspects of your sales and selling activities, and how you ultimately allocate your time and execute those activities.
The challenge at times is having a clear definition of what is "The Sales Cycle", is it a single measure, or a number of parallel and sequential elements?
I posted a piece this morning that looks at the need to sort through the definition, and how to utilize it in your sales cycle.
http://www.sellbetter.ca/content/view/183/110/
I am interested in your feedback and definition, and whether you actively try to manage this.
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8 Answers
A good question, and a challenging one to answer. Since it's a fairly uniform question, It's valuable to understand why the question is asked in the first place. For planning and forecasting? For trend analysis? To measure productivity of individual salespeople? Understanding sales cycle time first requires knowing what, exactly, is a sales cycle, and sticking to that definition. Then the answer to the question needs to be applied in the right context.
Overall, the healthiest interpretation comes from Sharon Drew Morgen that the sales cycle is the period of time it takes the buyer to buy. There's wide variance depending on a whole bowl full of external and internal factors--some within a salesperson's control, but most not. Expensive items tend to have longer sales cycles than inexpensive items--but not always. Motivated buyers tend to purchase items faster than unmotivated buyers. Buyers who perceive less risk tend to purchase faster than those who perceive high risk. These observations cut across product lines. I've experienced buyers who have toiled longer than a year about a sub-$10,000 purchasing decision, and other companies reach a decision to buy global enterprise-wide software applications in less than a month or two.
So the answer to the question "How long is your average sales cycle?" becomes a matter of "so what?" If I say "It's 4 months!" What does it mean? It's just a number. The greater issue is how do companies use the insight. If it's four months, why? Is it trending shorter--or longer? What forces are creating change? What does this cycle time mean for my company's financial planning and risk management? Do our sales compensation policies match the risks and offer rewards that are congruent with this period of time?
This is a question that has variable answers, as all sales people have different time cycles and methods, even within structured organizations. eg. whilst recently at a client's site, there were those that made few calls and lots of sales, and those that made loads of calls and few sales. It is my belief that the 20/ 80 ratios are at work in all selling situations. ie you will get 80% of sales from 20% of the people.
If you have an average sales selling cycle time, you can target to decrease it by applying systems that work for the successful people. You can coach your most successful people to do more in a shorter time, and increase your sales by 20% - its more or less guaranteed if you work with the stars they will increase even more. Measure yourself too, against any likely competition and strive to decrease your sales cycle by speeding it up. When clients make quick buys, they are usually from a gut or knowing position, and are far more secure. If you have extremely expensive equipment or services to sell, you will already have the prospect and their details on your system, so it ought to be approached with positive behavior to ensure success.
Good luck.
It seems the sales cycle continues to decline somewhere between 5-10 weeks. There is so much information available on the web and references that quantifying a decision with price keeps getting easier. Additionally SaaS services remove the burden of maintenance and overhead making those decisions simpler also.
Buyers remind us that the length of the sales cycle is at least going to be the the length of the buying cycle, to accelerate one requires accelerating the other. But, with buying decisions are starting earlier and finishing later when do you start the clock ticking? For each prospect that is ready to sit with a vendor, or receive a proposals, there are 8, 10, or perhaps more that are not. There may be no budget, no business case, etc. So the sales cycle and the marketing cycle must connect.
The sales cycle depends upon the product or service you are selling. More complex products have a longer cycle, as do products that have more risk in the decision making process. With many B2B products there is contractual decision making date. For example insurance contracts renew on a certain date. Depending upon the product or service, the cycle could be two weeks to six months, or more. If you are selling a product or service where there is a contractual deadline, having a CRM that manages expiration dates is key. Where there is no contract expiration date, it is important to establish a decision date or time line. However, it is the customer who dictates time of the buying cycle versus your sales cycle.
I have found that the credit and collection industry averages 3-4 months but can be upwards of 6-12 months, or sometimes longer.
Tibor,
I am afraid the situation is even murkier than you describe it. I agree that the lengths of the customer journey is the yardstick. But when does this journey start? It starts when first proactive actions by the selling organization are taken to move the buyer into a troubled stage. As my friend Hugh Mcfarlane says one prospects with a problem are willing to spent money.
I used the term selling organization deliberately here. It is not necessary that sales undertakes this activities. Depending on the help the customer needs to understand a problem it can as well be marketing doing this job. Logically the sales cycle then would only start when the sales person first enters the buying journey.
I also agree with you that the sales cycle migth be interrupted when the buying journey stalls. Whether to consider this time as part of the sales cycle length again depends who takes care of the customer until the buying journey moves on. If marketing takes accountability for nurturing the prospect, then this time should not be part of the sales cycle, because sales has no efforts.
In consequence the time to revenue is best estimated by looking at the length of the buyer's journey.
Tibor, I like your distinction between average sales cycle and the average client acquisition time, very helpful. We see a lot of sales processes, and I mean a lot of them. Thousands. We've found that successful sales cycles were 23% shorter in 2009 than 2008. We also found that a lost deal takes 50% longer to lose than a won deal, which tells you how important it is to qualify your opportunities well and early. Either you should not be in the deal, or someone else sold better than you. I hope this contributes to the discussion.
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