5 Ways Sales Cycle Length Can Help Your Team
Analysis of sales cycle length is one of the most valuable sources of insight for sales operations. Drilling into how long it takes deals to move through the pipeline, from a lead entering CRM to a signature on the dotted line, can reveal ways to improve a team’s performance as well as ways to increase efficiency internally. But figuring out how to analyze sales cycle length and where to apply the insight within an organization can be difficult. Here are five places you can start:
Forecasting sales without examining sales cycle length is like trying to drive a car in the dark without headlights. To create an accurate sales forecast, sales operations managers need to know how many deals in their pipeline will close and the time it’ll take each one to do so. To do this, they look to the average sales cycle length and compare that with where each current deal stands.
Marketing investment can be difficult to track back to revenue. Companies can spend millions of dollars on events, webinars and content, but without knowing how long it’ll take the opportunities created by those initiatives to turn into actual revenue, it’s impossible to track return on marketing investment. Knowing the length of the sales cycle gives companies a benchmark for when they can expect to see results for their marketing efforts.
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Determining sales cycle length can help management determine how many sales reps they need to hire in order to effectively capitalize on their pipeline. Imagine a team generates about 40 leads per month. By multiplying the number of leads per month by number of months in their sales cycle, we can make an estimate of how many deals they’ll have in their pipeline at any given time. In this scenario, let’s say the company has an average sales cycle length of six months. Multiplied by their 40 leads per month, we know they’ll have an average pipeline of about 120 deals. Now let’s say this company’s reps can take on an average of 15 deals at once. When the pipeline size is divided by the carrying capacity of a rep, it reveals how many reps a team needs to hire to effectively work their pipeline. In the scenario above, the team would need 16 reps.
Once a company knows how large of a sales team they need, actually building it can be a tricky process. Onboarding new people is a large up-front cost. They must be hired, trained and given a period of time to get their feet wet before they can be expected to be productive and start to produce a return on investment. Having an accurate grasp of their sales cycle length allows teams to gauge how long a grace period to give each rep before their performance is judged. For instance, if a team has a six month sales cycle, performance reviews after three months will appear to be woefully bad. Give sales professionals at least a full sales cycle plus a couple of months before gauging their performance.
Optimizing Sales Activity/Managing Pipeline
Managing a sales team effectively means making sure they aren’t spinning their wheels on deals that are dead in the water. Though it’s a sales rep’s job to call off the chase when a deal isn’t going to close, it’s very common for deals to sit in the pipeline long after the deal is already doomed. Whether it be “happy ears”, reluctance to admit defeat or out-of-date CRM data, it’s inevitable that at some point every pipeline will be inflated with hollow deals. Sales teams can minimize this misleading data by keeping a close eye on the length of time deals have been in the pipeline and comparing that to the sales cycle length. The longer a deal sits in one stage, the higher the chances it will die on the vine. Diligently tracking timing on deals can help sales teams close more effectively and be more accurate when assessing their pipeline.