One thing I love asking sales leaders is “Do you know how long your sales cycle is?” The exchange usually goes something like this:
“How long is your sales cycle? Do you know?”
“Oh sure, it’s typically a 6 month cycle.”
“How do you know?”
“Well, there’s a 1 month trial and it usually takes us a few months to get the stakeholders lined up, so . . . about 6 months.”
“Have you ever calculated it?”
With the pervasive use of CRM systems, like Salesforce.com, you collect more data than ever before. You have a new opportunity your predecessors never had: the chance to use real data to replace your gut instincts and improve your sales performance every month. Why should you know your average sales cycle length, inside and out? Read on.
A Typical Sales Opportunity
Every sales rep sets a close date when they create an opportunity in Salesforce.com. And creating that opportunity can be a giddy experience. Your reps might have “happy ears” coming off the phone with their new addition to the pipeline. They will never be more optimistic about the chances to close the deal. But optimism leads to over estimation, something that only hurts your sales forecast.
Charting your forecasts, like the one above, maps the expected deals that you will close over a given period. Clearly your primary target is closing deals before the end of the month, but you also should keep an eye on building your opportunity pipeline down the road.
Knowing your typical sales cycle length — and the likely variation factors like geography, experience level, or product line — helps you set accurate expectations from the beginning. Using your known, average sales cycle to estimate expected close dates is a best practice.
Cleaning Out Bad Opportunities
Engagement during the sales process is an under-appreciated means to understand an opportunity’s level of interest. Holding other external factors constant, an excited opportunity will progress through the pipeline quicker than someone who is being forced to be on the phone with a vendor.
Knowing your sales cycle lengths, backwards and forwards, is the first filter for identifying if an opportunity is a strong one. If you know exact lengths for different opportunity stages in your sales cycle, you can identify which opportunities are “dead wood” and need to be cleaned out of your pipeline because they’ve dragged their feet for too long.
Analyzing your data from Salesforce.com creates a neat sales cycle metric that sets a baseline for all future deals. In addition to knowing how long a typical deal takes, you also now have a gauge of your opportunity’s interest.
If you expect some of these overdue deals to really close, you are going to be in for a surprise. And if there is one thing I don’t like doing, it’s surprising my CEO with bad news at the last second.
Want to take your sales cycle calculations to the next level? InsightSquared makes it simple.