What is the length of a sales cycle?
The average sale takes anywhere from 6-12 months to close depending on product or service type, complexity, size of company selling it, etc. For this reason, many organizations have trouble estimating how long their own sales take because they don't know what kind of pipeline they currently have in place. There can be large variances between different industries as well—a pharmaceutical manufacturer may find that its fastest sales occur within the first month while an auto parts supplier could experience longer sales cycles due to complicated processes. Knowing exactly where you fall will help you understand which areas need improvement and which ones already work relatively efficiently.
In this article we'll explore why some companies sell quickly while others take much longer than anticipated. We’ll also explain exactly what “average sales cycle” means and look at several key performance indicators (KPIs) that determine whether the timeframes being used by manufacturers match up with those of consumers.
What is your typical sales cycle?
While there isn't one specific answer when talking about "typical" sales cycles, typically these timespan range from three to 18 months. The shorter end of the scale represents products that are easier to market and require less involvement once sold such as consumable items like food, beverages, cleaning supplies, pet care, beauty aids, electronics, toys, books, magazines, stamps, greeting cards, jewelry, furniture, clothing accessories, gift wrap, office equipment, sports merchandise, DVDs, CDs, video games, seasonal items, etc. These types of products tend not to last very long before someone makes use of them. In fact, if you've ever gone out to dinner at a restaurant, then eaten all but one bite of your meal only to discover that the entrée was finished hours earlier, you would likely agree that most consumer goods follow this pattern too!
On the other hand, larger ticketed items will often go through multiple phases before completion and are more complex to manufacture. While this process does vary greatly based on each individual situation, here's a general breakdown of common sales cycles:
Pre-order - This part of the sales cycle begins when a customer places an order either online or over the phone. If the item is still under development, then it goes into pre-production. After production has begun, the next step of the cycle is quality control testing followed by packaging design or assembly line construction. Shipping/delivery usually occurs after the final phase. From beginning to end, expect anything from 2 weeks to 12+ months depending upon the specifics of the transaction.
Production & Packaging - This refers to making the actual product itself. When done, shipping occurs from manufacturing to delivery. On average this stage lasts 3-6 months. Some retailers even offer free express shipping during peak shopping seasons to encourage customers to make purchases sooner rather than later.
Distribution - Once inventory arrives at retail stores, workers must stock shelves and display items appropriately. Typically this phase happens 4-8 months following shipment. During summer, back-to school season, holidays, and other busy periods, expect shipments to arrive faster so store employees can meet demand.
Retail Sale - As soon as something hits shelves, shoppers begin using it. Retailers generally keep items in stock for 1-3 years. Most people purchase new items around the holiday season since it saves money on gifts.
Online Purchase - Online orders are placed directly from website pages after checkout. Customers pay immediately after placing their order without waiting days for credit card processing and approval. Expect to wait 1 week to receive your item. Orders made during off-peak times should ship quickest whereas big sellers and popular items get backed up behind bigger orders.
Returns - Returns happen when a shopper receives a damaged, defective, or incorrect item(s). Depending on policy, returns can take anywhere from 24hrs to 30 days to clear. Many businesses provide a prepaid return label to speed up the process. Returned items are inspected and repaired where possible. Shoppers who had previously purchased another similar item instead of the returned item are offered a discount on future purchases.
Now that you're familiar with the main components of a typical sales cycle, let's discuss what sales cycles actually mean.
What are sales cycles?
Sales cycles refer to any point along the path outlined above where a transaction is initiated by a seller. Whether it starts with an Internet search, a direct mail advertisement, a promotional event, a trade show visit, a social media post, an email inquiry, an ad in a magazine, a newspaper classified ad, a radio spot, TV commercial, billboard, or flyers posted on bulletin boards, most buyers start searching for information related to a desired product or service somewhere near the beginning of their journey. It's important to note however that sometimes certain steps overlap meaning that it doesn't always matter when a potential buyer becomes aware of a particular product or brand. A good rule of thumb is to consider every avenue of marketing communication as a potential lead regardless of source.
There's one question that every entrepreneur struggles with at some point: How long should my sales cycles be? The answer to this depends on your business model as well as what stage it's currently in. But if we can agree that there are certain best practices when it comes to sales processes, then maybe all entrepreneurs could benefit from a little guidance about how long their typical sales process actually takes.
In our article "The Best Practices Guide To Growing Your Business," we covered everything from hiring to marketing, but today I want to focus specifically on another important aspect: managing your sales pipeline. In order to help you get an idea of just how long your sales process usually lasts, let's take a look at some common metrics for a software company selling through enterprise accounts such as corporations and government agencies. These numbers come directly from publicly-available data sets like Gartner Hype Cycle reports, so they're not pulled out of thin air -- these companies have been tracking their own sales pipelines for years!
So without further ado, here are some key milestones along the road to success for most enterprises using SaaS products...
What is a good sales cycle length?
For a new startup, a full year might seem overly optimistic. However, many successful startups manage to sell more than half of their user base within 12 months (and often even less). So while it may sound strange for someone who has never done it before, sometimes it makes sense to expect only six months per sale instead of nine months. This gives founders time to grow their team and find investors, rather than trying to rush growth by expanding too quickly into market sectors where demand isn't yet high enough. If you plan on bootstrapping your way to profitability, make sure you don't go overboard with expectations for revenue growth.
But what does a healthy sales pipeline look like? According to research conducted by SoftwareAdvice, the ideal sales pipeline size ranges between 10% to 20%. For reference, having fewer than 5 active deals will likely result in significant financial loss due to unrecovered fixed costs. On the other hand, having more than 50 open deals won't provide much value either because they'll require excessive management overhead.
This means that somewhere around 15% to 25% would probably serve as a good middle ground for most businesses looking to stay profitable. If you've already passed this milestone, congratulations! You're doing great! Keep reading below for tips on determining exactly which metric applies to your situation.
Which do you prefer a long or short sales cycle?
While there aren't any hard and fast rules regarding the right number of sales needed to call yourself a successful entrepreneur, there are definitely some general guidelines worth keeping in mind. Here are some points to consider:
Longer sales cycles tend to work better for mature markets and industries that require extensive customer qualification. They also allow customers to become accustomed to dealing with multiple vendors before making a decision. While longer sales cycles mean higher upfront investment, they enable larger organizations to leverage economies of scale to lower prices over time.
Shortening a sales cycle for early adopters allows them to try new technologies out sooner, increasing adoption rates among first-time users. It also helps ensure faster ROI since small teams can test new features against competitors' offerings. Short sales cycles are especially useful for rapidly growing start-ups aiming to keep up with investor demands.
Although both approaches have pros and cons, each has its personal preference depending on specific circumstances. At the end of the day, however, no matter whether you choose to shorten or lengthen your sales cycle, you need to maintain strong communication throughout the entire sales process. Make sure everyone involved understands what needs to happen next in order to complete the deal successfully.
How long is a sales cycle?
When talking about the actual length of a product development lifecycle, there's no single universally accepted definition. Some sources claim that the average sales cycle length is anywhere between 9 to 18 months. Others say three to five years. Still others suggest that it varies greatly based on factors like location, target audience, competition, etc., ranging anywhere from two weeks to several decades. And as always, context matters. A lot.
To avoid getting lost in this mess of conflicting information, we recommend breaking down the sales cycle into four distinct phases: Pre-sales, Early Adoption, Late Adoption, and Maintenance. By carefully monitoring these different stages, you'll know exactly where your business stands at any given moment. Just remember to monitor for changes in overall market conditions that affect demand.
Pre-Sales: During pre-sales, potential buyers begin exploring alternatives to existing solutions. Sometimes referred to as RFP/ITSP ("Request for Proposal" / "Information Technology Solution Purchase") phase, this typically encompasses various types of vendor discovery activities like competitive analysis, white paper evaluation, demos, etc. Ideally, during pre-sales, customers narrow down possible choices to 2–3 vendors. As a rule of thumb, it shouldn't exceed 6–8 months unless there are special requirements beyond normal scope of services.
Early Adoption: Once prospects identify a solution provider, the real fun begins. During early adoption, the client evaluates the chosen offering under realistic usage scenarios, focusing on areas of strength and weaknesses. Depending on the nature of the deployment, this period can last anything from 1 month to 3 years.
Late Adoption: Most clients now realize that buying something doesn't necessarily mean installing it immediately. Therefore, after qualifying a prospective buyer, providers must prepare them for eventual installation. Hence late adoption, or post-purchase training, tends to span anywhere from 4 months to 2 years. Again, this timeframe largely depends on individual preferences and goals.
Maintenance: After initial adoption goes smoothly, maintenance becomes pretty straightforward. Unfortunately, this phase gets neglected far too often, resulting in unnecessary delays. Generally speaking, maintenance periods range from 1–2 years, although again, it can vary considerably if necessary.
As you can see above, the total amount of time spent interacting with a prospect depends heavily on the type of project being considered. But regardless of whether you opt for a long or short sales cycle, you still need to remain flexible as market realities change constantly. No matter how many times we tell ourselves otherwise, things rarely ever go according to plan. That said, taking advantage of opportunities whenever they arise will significantly improve chances for success.
What is the average sales cycle in SaaS?
Now that you understand why it's difficult to determine exact sales cycle lengths, here's your chance to finally learn what the average sales cycle looks like in SaaS. Thanks to some brilliant researchers at Harvard University, we now have access to publically available data describing the average sales timeline across thousands of enterprise users worldwide.
Here's how it breaks down:
On average, enterprise SaaS purchases take 8 months to close. Half of those transactions took place within the past 3 months.
Of remaining sales, 65 percent were closed within 3 months, and 95 percent were completed within 24 months.
However, the median duration of a sales cycle was found to be 7 months - meaning that the vast majority of users saw their purchase closing within 7 months.
Looking at this graph, it seems obvious why it's so critical to establish clear roles and responsibilities from Day One. Otherwise, the whole thing could fall apart very easily. Also note that for smaller projects, the distribution peaks sharply towards shorter timelines.
With these insights, you should be able to figure out whether your current sales system is working as efficiently as possible. Now you can adjust accordingly and continue improving upon your internal efficiency until reaching optimal results.
A final word of advice: Don't get frustrated if you don't hit these averages perfectly straight away. There's no use complaining if you haven't achieved your stated goals within 30 days. Instead, accept that it'll take some time to ramp up properly, and simply track progress via KPIs (key performance indicators) to inform future decisions.
And now it's your turn. What kind of organization do you run? Is your sales process efficient? Are you struggling to meet targets? Share your experiences with us in the comments section below! We'd love to hear back from fellow readers.
Many people don't realize that there are different types of businesses in the world. You can have an hourly service business or a retail store, but when you're talking about software as a service (or SaaS), it's important to understand what kind of company you're dealing with first.
Let's start by taking a look at how SaaS companies sell their products. This will help us answer questions like "how long should I expect my order to take?" And if you've ever wondered why some small business owners seem so frustrated over slow orders while others enjoy fast shipping times, this might give you some insight into how things work on the ground floor.
What is the sales process for SaaS?
The way most SaaS-based startups go about selling their product varies greatly from one another. Some rely heavily on online demos while others use more traditional methods such as phone calls. However, no matter which tactic they choose, many SaaS providers follow similar processes.
Usually, after someone becomes interested in using a new service, potential customers contact reps who then begin explaining what exactly the provider offers. These representatives typically explain everything from pricing plans all the way up to support options, depending on whether the customer needs assistance during setup. Depending on where a person lives, these conversations may happen via email, telephone call, live chat, video conference, etc. Afterward, reps often ask for feedback on the presentation. They also offer information on how much time it'll take to get set up once the client signs off on the proposal. The goal here is to make sure each prospect feels comfortable before committing to anything.
After receiving positive responses from prospects, the next step involves getting clients signed up. In general, the steps for signing up vary slightly based on the type of service being offered. For instance, the signup process could involve setting up an account, uploading documents, creating a password, etc., whereas other services only require agreeing to terms and conditions. Once again, however, the basic concept remains the same across the board: reps walk prospective buyers through every aspect of using the app/service/product.
Once a user has been properly trained, he or she begins experiencing the full benefits of working within the system. One thing worth noting is that users aren't expected to pay right away — instead, payments are usually made monthly or quarterly. So even though you might be paying per month, you won't actually see any money until the end of those billing periods. As far as fees go, prices depend entirely on the price plan chosen. Generally speaking, SaaS companies tend not to charge extra upfront costs unless they're offering special deals that apply exclusively to new customers. Most firms do add a fee called a milestone payment, which represents part of future revenue collected in exchange for immediate access to the application. If you want to learn more about milestones, read our article on common misconceptions about SaaS.
What is SaaS sales like?
As mentioned previously, the exact way in which SaaS vendors present themselves differs widely between companies. While some focus primarily on marketing efforts, others prefer to keep quiet about their intentions. Whatever approach they take, however, everyone agrees that the key to success lies in making good initial impressions. Here are just a few ways in which successful SaaS startups handle the early stages of engagement.
Online demo: Many SaaS applications allow visitors to try out features without having to commit to them. To do this, simply visit the website and click around aimlessly. When you encounter something you find interesting, press play and watch as the relevant page loads in its entirety. From here, you can test drive whatever works best for you. If need be, you can jump back and forth between pages whenever you wish. Of course, we recommend doing plenty of research beforehand to avoid wasting precious seconds testing unnecessary features. It's also wise to check out the FAQ section if possible.
Live Chat: Live chats are great for helping customers determine if the solution meets their specific requirements. Since it's difficult to gauge a web interface from afar, chatting with a real human makes sense. Ask open-ended questions and let the representative know exactly what you need. Make sure to listen carefully and stay focused — bad grammar or typos will cost you valuable points. Also, remember that this option isn't available 24 hours a day, so it's helpful to schedule meetings accordingly.
Phone Call: Phone calls provide a less effective alternative than live chats, but they still come in handy for certain situations. Try asking questions pertaining to technical aspects of the product or service, issues related to implementation, etc. Again, be careful with language! Remember that the rep you're communicating with probably doesn't speak English as his or her primary language, so keep sentences simple and clear. Another benefit of calling is that you can talk with multiple reps simultaneously, allowing you to compare answers and ensure consistency throughout.
Email correspondence: Emailing allows you to send messages directly to a particular individual rather than trying to fit several contacts into a single conversation. Plus, emails are generally faster and easier to compose than lengthy texts. Emails are also ideal for discussing details outside normal office hours since they don't require scheduling appointments ahead of time. Be sure to include subject lines that clearly convey the message you intend to deliver. Don't forget to proofread thoroughly and spellcheck frequently. Mistakes show disrespect toward both yourself and the entire team.
Support Center: Like phone calls, support center visits are useful for finding out additional info about apps and providing troubleshooting tips. Representatives spend time answering clients' questions regarding customization, configuration, updates, upgrades, etc. Support teams also sometimes host events specifically designed for prospective customers looking to learn more about the platform.
It's important to note that not all SaaS solutions operate under identical circumstances. Different industries have varying demands, meaning each case requires customized attention. That said, following the above guidelines should serve you well regardless of your field of interest.
What is your average sales?
Once you've successfully landed a lead, you now have to convert it into a sale. How quickly you close a deal depends largely upon the nature of the relationship established with your customer initially. In many cases, closing the sale starts with a series of follow-ups. If your pitch was solid enough, reps should be able to reach customers on a regular basis to remind them about upcoming deadlines, update them on progress, and solicit input on improvements. Additionally, reps must strive to maintain strong communication channels throughout the duration of the partnership. Customers appreciate knowing exactly who to turn to for help when needed.
However, despite the importance of keeping tabs on existing accounts, it's equally vital to nurture new leads as soon as they appear. Reps shouldn't wait too long to engage with fresh faces. Otherwise, competitors might scoop them up before you have a chance to establish rapport.
On top of that, reps should always consider referrals. Referrals represent untapped sources of income because they indicate growing demand for the product or service. Getting referral partners involved helps boost brand awareness. Furthermore, referring satisfied customers gives reps a shot at landing bigger contracts down the road. Allowing people to share their experiences with your product encourages word of mouth advertising, which generates buzz among friends, family members, colleagues, and acquaintances alike.
Don't forget to track your conversion rates. Although it's impossible to predict every outcome, statistics prove that tracking metrics increases chances of success. Identify patterns and trends, and adjust strategies accordingly. Analyzing performance regularly lets reps identify areas needing improvement.
Finally, reps must never hesitate to adapt tactics to suit changing circumstances. Every situation presents unique challenges. Even if a strategy worked earlier, it might not yield optimal results anymore. New developments in technology or industry standards may necessitate revisions to your playbook. A flexible mindset enables you to react swiftly to changes that arise unexpectedly. Adaptability goes hand-in-hand with flexibility. Never assume that your current methods will continue yielding satisfactory results indefinitely.
What does average sales mean?
Now that you know what constitutes a typical sales cycle, you might wonder what averages really mean. Does it affect your bottom line? Can you shorten your own sales cycle? What factors contribute to increased efficiency? Read on for answers to these questions and more.
Shortening the sales cycle means cutting down on the number of hoops consumers have to jump through prior to purchasing goods or services. Ideally, the path between first hearing about a product and finalizing the transaction would be shorter than usual. Shortenings like this result in higher profits for sellers, which ultimately translates to happier customers.
One area in which shortening the sales cycle significantly impacts profitability relates to marketing expenses. Marketing budgets are especially vulnerable to reduction due to high overhead costs associated with ineffective campaigns. By focusing solely on generating qualified leads, marketers can slash spending on promotional materials and media buys.
Another factor affecting overall efficiency is response rate. Response rate refers to the percentage of incoming leads converted into purchases. Higher response rates translate into greater revenues for sellers. Unfortunately, poor response rates occur when consumers fail to recognize value propositions presented by brands. Companies attempting to increase response rates should utilize targeted ads, cross-media platforms, and innovative promotions.