Just realized this morning while researching the sales cycle for one of my customers that I took for granted the fact that people would know and understand the intricacies of their deals sales cycle – here I am refering to startup Founders and or their Revenue leaders. What I mean is that understaning deeper the deal sales cycle implications goes beyond mere timelines, touching upon the rhythm and pace at which sales operations should ideally move.
So, in my attempt to make a habbit of listing quickly these kind of thoughts, I’ve put toghether the top key reasons why this understanding is crucial, trying to use real-life examples to illustrate each point.
The Diminishing Chances of Closure
One of the first revelations I’ve encountered during my research is the stark drop in the likelihood of closing a deal as time extends beyond your average sales cycle. It’s a phenomenon observed across various industries, where the initial momentum of a promising deal gradually fades. According to “2023 B2B Sales Benchmarks Report” conducted by Ebsta, deals that went 1 month beyond the ideal sales cycle had a 60% decrease in closure probability, which further dips by 90% with each passing month.
Imagine you’re rolling out a new software solution. Initial interactions are promising, but as weeks turn into months without a definitive close, interest wanes, and priorities shift. This situation is far too common and highlights the need for a proactive approach to keeping deals within the ideal timeframe. Strategies such as setting clear expectations early on, regular follow-ups, and addressing potential objections before they arise can help maintain the deal’s momentum and significantly improve closure rates.
Testing New Sales Strategies
When introducing new sales strategies, new ICP or processes, positionings, or pricing, it’s natural to seek immediate validation through quick wins. However, the true measure of a strategy’s effectiveness often requires a longer view, spanning at least two full sales cycles. This patience allows for the natural ebb and flow of the sales process, providing ample data to assess a strategy’s impact.
Consider a scenario where you’re experimenting with a new pricing model. Early results might be inconclusive or even disappointing or even generating panic (sometimes), tempting you to revert to the familiar. Yet, if you allow the strategy to run its course over multiple cycles (like mentioned above, a minimum of two sales cycles), adjusting and refining as you gather more feedback, you may uncover valuable insights that lead to a breakthrough in your sales performance.
New Sales Hires Ramping Expectations
Setting realistic expectations for new sales representatives is crucial for their integration and long-term success within your team. The length and complexity of your sales cycle play a significant role in this. Expecting immediate results from new hires can lead to undue pressure and potential burnout, especially if your sales cycle is inherently long.
For example, in a company with a complex, solution-based sales process that spans several months, it’s unreasonable to expect new reps to close significant deals within their first few weeks or even months. Recognizing this, you might focus on a structured onboarding process that aligns with your sales cycle, providing new reps with achievable milestones and the support they need to gradually build their capacity to contribute to the team’s targets.
Enhancing Sales Forecast Accuracy
Accurate sales forecasting is the lifeblood of effective sales management and planning. The depth of your understanding of the sales cycle directly influences the accuracy of these forecasts. A common pitfall is basing forecasts on overly optimistic timelines that don’t account for the real-world complexities of closing deals. This is one of the most often reasons why many B2B SaaS Startups fail to meet investors scaling expectations.
So, you may want to align your forecasts with the actual durations and outcomes of your sales cycles, thus creating a more reliable foundation for decision-making. This might involve analyzing past deals to identify patterns and using this data to refine your forecasting models. The result is a more strategic approach to sales planning, budgeting, and resource allocation, grounded in the realities of your sales process.
Budgeting with Confidence
Closely linked to forecasting, your grasp of the sales cycle also enhances your ability to budget with confidence. Understanding the ebbs and flows of your sales process allows for more informed financial planning, ensuring that resources are allocated efficiently and growth targets are set realistically.
Take, for instance, the planning of marketing expenditures. Knowing that your sales cycle might have a longer lead time allows for strategic investment in long-term lead nurturing campaigns, rather than short-term blitzes that don’t align with your sales timeline. This strategic alignment between budgeting and the sales cycle ensures that every dollar spent is optimized for the best possible return, fostering sustainable growth.
So, Sales Cycle is not just a KPI
The knowledge of your deal sales cycle is not just a KPI or fancy / procedural understanding; it’s a strategic asset that influences every facet of your sales operations. From maintaining deal momentum to setting realistic expectations and making informed forecasts, the insights gleaned from a deep understanding of the b2b sales cycle empower you to navigate the complexities of sales with greater confidence and effectiveness. As you continue to refine this understanding, remember that it’s not just about the numbers—it’s about aligning your strategies, expectations, and resources with the natural rhythm of your sales process to achieve optimal results.