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This is a guest post by Lauren Kelley, CEO of OpexEngine, a leading developer of financial and operating benchmarks. 

There are millions, okay, hundreds, of benchmarks floating around these days. Sales productivity should be A, B, or C, funnel conversion rates are typically such and such a percent, or churn rates have to be no more than X or your company is in big trouble. Whatever the metric, someone has a definitive answer for what it should be.

It is enough to make your head spin, especially as you often have a vague sense that somehow, the comparisons aren’t quite right. Your company doesn’t look like Box, isn’t as big or mature as Salesforce, and has a completely different sales model than the latest hot company proclaimed to have the best model for success. The key is that in order for benchmarks to be useful and provide important comparisons to plan for changes at different stages of growth, they must reflect your company’s size and business model.

If you know houses in an expensive suburb are going to be higher than in a low cost part of town, when you go to actually buy a house, you still need to know specifically how much comparable houses sold for recently in order to set your budget and fine tune your purchase negotiation. Your negotiation will be more effective, your budgeting will be more careful and your planning (how much money you should spend on your renovations and upgrades) will be more accurate. You always perform better with more information. It’s the same thing with operating benchmarks.

Sales-Benchmarks-Interactive-CTA

Interactive Sales Benchmarks

See how your company stacks up against others in your industry by exploring our filterable Sales Performance Benchmarks.

Sales Cycle Benchmark Vary by Average Contract Size

Most everyone knows that sales cycles for low priced products are shorter than sales cycles for high priced products. Customers make purchase decisions faster for small ticket items than for large purchases.

Companies selling a low priced subscription, usually have a low touch, highly automated sales and marketing model, with a cost structure reflecting an inbound marketing model. Companies selling a high priced subscription, typically to large enterprises – not many SMBs will buy $100k+ subscriptions – usually have a high touch sales and marketing model with different costs than you’d have if you were selling to SMBs.

However, it makes a difference to your revenues and expenses if you can sell a large ticket item in 12 months or in 9 months. If the same sales team took 9 months on average to sell products, they could sell 25% more than doing it in 12 months, all other things being equal.

Let’s look at these this example of a benchmark for 2 groups of private, SaaS companies, with average recognized revenue of approximately $28M. At OPEXEngine, we define Sales Cycle duration as the number of days from the time that a Marketing Qualified Lead (MQL) is registered to the time of deal close.

Sales Cycle Duration

The number of days from the time when a Marketing Qualified Lead is registered to when a deal closes.

So, the companies inputting their data into our member-based benchmarking platform follow a consistent definition. Companies frequently use other sales cycle metrics internally. When you are benchmarking, you need to use the benchmark definition in order to a meaningful comparison.

How long, on average, does your sales team take to close a deal? The first thing you should look at is whether you have good data to calculate your average sales cycle duration. Then, looking at the chart above, you see that comparable companies are currently selling large subscription contracts in 6 months. The next step is to dig into what you can do to improve sales cycles.

  • Which salespeople are closing deals faster than the others?
  • What sales process do they follow?
  • Can they identify the bottlenecks in the system that might be slowing down the others which they’ve figured out how to get around?
  • Does everyone need better marketing materials or more qualified leads or better training to shorten the sales cycle?

The benchmark is a spur to action. A shorter sales cycle will increase revenues as you can close more deals in the same period of time without any additional expense.

The benchmark is a spur to action.

In the same way that high performance athletes are constantly benchmarking their performance, both in terms of final result, as well as by breaking down the component parts that go into achieving the final result, high performance companies use benchmarking to accelerate their performance.

At OPEXEngine, we track sales ops benchmarks with clear definitions like:

  • Total sales expense and headcount
  • Bookings per sales rep
  • Quota achievement
  • Sales ramp time
  • Sales cycle
  • Total number of Marketing Qualified Leads and Cost per MQL
  • Total marketing expense and headcount
  • Customer velocity
  • Renewal rates
  • Cost of customer acquisition
  • Average Customer Lifetime Value
  • And much more

For more information about benchmarking, contact us for a free demo of our benchmarking platform at info@opexengine.com or www.opexengine.com.

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