Over the past few years we observed (in a measurable and analytical sense) tens of thousands of winning sales cycles. Through the Dealmaker platform, we can aggregate anonymous data, to learn about the [evolving] cadence of sales cycle. For each of our customers, Dealmaker allows them to track and measure the actual sales cycle of each deal, and analyze on a macro or micro level. For reasons of privacy and general good business practice, we don’t access individual customer’s data, but for certain accounts where we’ve been given explicit permission, we have been able to measure sales rhythm, and extrapolate to an overall measure of global sales velocity that we feel is a good indicator of the changing nature of the business of sales. Here are some facts you might find surprising.
- Fact #1: Winning Sales cycles are shortening. This may appear to be counterintuitive, but, over the last 12 months, in an economy that been as difficult as many of us will ever have seen, winning sales cycles are getting shorter. The time from Qualify to Close has reduced by a little more than 23% over the past year. Finding truly qualified opportunities has been harder, as many projects have been stalled or cancelled, but when green-lighted, they’re closing faster than before.
- Fact #2: It takes 150% longer to lose than win. On average, the typical salesperson spends 150% of the time on deals that he (or she) eventually loses, than he does on deals that he wins. The sales cycle for opportunities that you eventually lose drags out for much longer, and the attendant cost of sale (or in this case ‘cost of loss’) is much higher. When you think about this, the impact to your overall sales and organizational velocity and productivity is staggering. The opportunity cost (no pun intended) is huge. The organizational cost, measured by mis-allocated resources, inaccurate sales forecasts, and missed [winning] opportunities is dramatic. If your win rate is 50%, then you’re only spending 40% of your actual selling time on winning deals. That probably equates to just about 20% of your total time on winning!
- Fact #3: Most [winning] sales cycles follow a predictable pattern. In a specific company, most sales efforts that results in a sales win follow a predictable pattern. When you remove the exceptions at each extreme of the spectrum, the time is takes to move through each stage in the sales cycle is fairly standard. If the average length of time that it takes to progress a sale from a verbal order to a signed contract is 20 days, then guess what – it usually takes around 20 days to make that progression. No matter how good you’re feeling about a deal, it’s unlikely that you will get the contract signed to include in the quarter’s numbers, if you’ve only 5 days left. Understanding the actual sales cycle of each deal, and the average sales cycle across all deals, helps hugely in arriving at accurate sales forecasts.
- Fact #4: Rushing through Qualification or Needs Analysis lengthens the sale cycle. Intellectually, everyone understands this – but still sometimes some very experienced salespeople forget the basics. Spending enough time in the early stages of the sales cycle is crucial to managing the cycle, and yes, shortening the overall sales cycle. The data suggests that if you spend considerably less time (than average or recommended for your business) in the early stages of the sale, the latter stages drag out. This happens more frequently when the salesperson has not taken enough time to ensure that he and the customer have a complete and common understanding of what’s needed to satisfy the customer’s requirements. As the customer get closer to finalizing the deal, new items appear, for example, that the customer perceived as implicit requirements, but the salesperson didn’t include in his pricing. The result is that a complete mini-sales cycle has to be redone to get everyone on the same page before the deal can get signed.
- Fact #5: You WILL lose deals that are in the pipeline for more than 150% of the winning sales cycle duration. When you look at your pipeline, do you look at the total pipeline value, or do you examine the pipeline velocity. Based on the data we’ve observed, it’s really important to understand the value of your Active Pipeline, as opposed to your Total Pipeline. Most sales organizations will have a significant number of deals in the pipeline that are of little or no value, and the Total Pipeline value is just a number that the marketing department feels good about. It has little or no bearing on what’s going to flow through to closed deals. Deals that are languishing, are usually deals that should be ‘qualified-out’ or have already been lost.