This is a common question we ask our clients before we begin outbound sales, to give us a reasonably good idea of what to expect in the coming months.
The answers are invariably in the range of 30-45 days, which has almost never been right in my 10 years in sales. I can think of exactly one client for whom the actual average sales cycle length is about 30 days. So, what exactly is going on? Are my clients lying to me to get my company to perform better? Are they ignorant of the length of their sales cycle? The answer, I have found, is neither. It is a common logical fallacy that most sales managers fall prey to.
Let me explain.
Many upper level executives are unaware of the exact point in time that a business development executive initiates contact with a prospect. By initiating contact, I mean the time when the first cold email was sent, or the cold call was made, or the prospect was met at an event or a conference. The number of calls made, emails sent etc., are usually no more than numbers to them. They become aware of individual prospects only when they communicate interest in their product or service in some manner. Generally, this is considered to be ground zero and the starting point of the sales cycle, whereas in reality, this point is about 40% along the sales cycle in an outbound sales process. The executive probably sent several emails, spoke to the prospect over the phone and maybe even had some face to face meetings to get the prospect to actively engage with their product/company. In failing to include this in the sales cycle calculation, sales managers are skewing the numbers significantly.
The second important mistake, and one that should not be made at all is calculating the sales cycle of inbound and outbound processes together as a single number. When you get an inbound lead, the incubation period, that is the time during which the prospect is recognizing their pain point, realizing that they need a solution, as well as probably budgeting this solution is already over. In an outbound process, this is reversed. In several instances, there might not be a recognition of pain points until after contact has been made and they become aware of your product. So, sales cycle calculation should always be done independently for inbound and outbound processes.
The third error, and probably the least significant is that companies do not consider the entirety of their outbound channels when making the sales cycle calculation. For example, if a company pursues emails, phone calls, LinkedIn networking and attending conferences as outbound channels, I have seen that there is a tendency to ignore the least effective channels and calculate the sales cycle based on only the most effective ones. In the case of one of our clients, they were giving us the number only based on events/conferences. The catch here is obviously that events are seasonal and are only a part of the entire process. We cannot set targets for ourselves based on a part of the process.
So, what is the right way to do it, you ask? Let me tell you our story.
We are in a very low entry barrier business, by which I mean that every company is performing sales and is reasonably open to new avenues of lead and revenue generation. Other companies should make adjustments based on the entry barrier, competition in the market and any seasonal aspects to sales that they are subject to.
- An inbound lead usually matures and closes in 2-3 weeks.
- An outbound cold call that includes a referral takes about 3 months to close.
- A lead generated through cold email outreach takes closes in about 3-4 months.
- A lead generated by attending an event takes about 1-2 months to close.
These timelines double if the prospect is in a different country.
In our experience, the average sales cycle has never been less than 4.5 months, irrespective of whether it is a product or service. Shorter or longer sales cycles are usually seen based on the cost of the product/service, apart from the factors mentioned in the above paragraph.
Setting up a good sales process and improving it begins with understanding where we are today.
I hope this post helps to accurately gauge your as-is scenario. Feel free to write to me if you have any questions.