Let’s say you have created an excellent product, and the onboarded customers are super happy. Your sales reps are pumped up and your revenue forecast looks promising. You are expecting excellent sales in the future too.
However, just next month, you find your pipeline dry—your reps are scrambling for leads—and the revenue forecast is abysmal.
This happens because there is no standardized sales procedure. A sales cycle, which is the process of making new customers, needs to be standardized and optimized to expect consistent sales over longer periods.
Without standardized processes, there is no use of forecasts and revenue expectations, since your business is at the mercy of changing situations, and it’s always a good thing to plan for variations in demand.
Creating a sales cycle should be the first step for sales leaders and founders after getting their business up from the ground. Once your product is ready, there needs to be a set standard of protocols and processes that deliver it to the market- consistently. With a sales cycle in place, you can optimize and expand your processes to sustainably grow revenue and beat market fluctuations.
What is a Sales Cycle?
A sales cycle is the sequence of stages a sales team must go through to convert a prospect into a customer. It ensures that there are fixed stages in the prospect's journey to keep track of it. By defining these stages, an organization's sales efforts can stay organized and measurable.
Simply put, a sales cycle refers to the steps needed to create a new customer. The sales team of any organization needs to ensure that sales are consistent and reproducible. For this purpose, the steps required to convert a prospect into a customer are standardized and demarcated.
The main difference between a sales cycle and a sales process is that a sales cycle is a sequence of sales processes, each requiring different skills and each having different objectives. For example- Qualification is a stage in a sales cycle, which includes needs analysis, budget and timeline check, analysis of decision-making power, etc.
The cycle is a series of steps, and each step has different sales processes and methodologies to be carried out by the sales team.
A sales cycle in the modern era is slightly different and more dependent on the buyer than ever before. Because of the plentiful options and knowledge in the market, businesses have had to become more flexible in terms of selling and adapting to customer needs. The key to sales success is adapting to varied timelines and specialized needs.
Hence, a lot of businesses and business models (such as SaaS) have moved on from calling it a sales cycle and instead use the term ‘buying cycle’ to emphasize the assisted buying nature of modern sales. More information- higher flexibility- low barriers to exit - these are the characteristics of modern sales cycles.
Why is a Sales Cycle Important?
Creating and maintaining a sales cycle is tremendously important to keep sales revenue flowing. It is the framework subject to which strategies are formulated by the sales team to ensure that each prospect, no matter which stage of the buying journey they might be in, gets the perfect treatment to encourage closure.
A sales cycle has other benefits as well, and it is standard practice to develop and optimize a sales cycle as a business grows. Some of the major benefits or reasons for implementing a sales cycle are:
Brings structure to sales: Clearly demarcating sales processes and dividing responsibilities according to the stages in the sales cycle helps an organization structure its sales team more efficiently. Leads flow from one stage to another stage, and a set of stages can be assigned to different employees based on their specialization and exact skills. For example, initial contact, qualification, and needs analysis can be done by the SDRs, and proposal, negotiation, and closure can be undertaken by the AEs. It also makes for better hiring decisions since the exact requirements are according to the stage of the sales cycle they will handle.
Makes sales training easier: By dividing the sales process into stages, the skills required in each stage can be individually focused on in training, only for the specific people handling that stage. This specialization in training makes for better-trained reps and makes sales training easier because a smaller amount of more specialized resources are needed instead of general training which is much less effective.
Makes sales consistent and measurable: A fixed and consistent process of handling leads results in profound sales-readiness. How far leads progress before dropping off can also be measured thanks to the stages in the sales cycle.
Helps optimize the sales pipeline: By analyzing the stages at which most prospects exit the process, optimizations can be made to those stages specifically to improve sales performance. By rinsing and repeating this process for all such imperfections in the sales cycle, a strong sales pipeline can be formed with impeccably trained sales representatives.
The Evolution of B2B Sales
B2B sales are quite different from other types of sales. For example, in B2C or D2C businesses, there is no need for a typical sales cycle, as there is no engagement needed to sell. These models usually work on the AIDA (Awareness, Interest, Decision, Action) framework where their attention is captured and a buying decision is encouraged through marketing efforts. No relationship is formed between the buyer and the seller.
However, in B2B sales, and especially in B2B SaaS (Software as a Service), the entire sales process is completely different, and now more so than ever. Two businesses deciding to form a relationship and trust each other is what SaaS sales is all about. Hence, a lot more nurturing and customer success are required in B2B sales.
With the advent of AI technology and automation leaps, B2B sales have been completely transformed. Customer relationship management, AI chatbots, personalized outreach, etc. are the new norm in B2B sales.
What Are The Different Sales Cycle Stages?
The average sales cycle contains 7 different steps that each lead into the next. Some steps may be skipped out altogether in some details, but the outline is prospecting, connecting, qualifying, nurturing, proposing the offer, overcoming objections, and finally deal closure.
One must remember that clearly distinguishing between the different stages of a sales cycle is often a tough task, especially in B2B SaaS sales. Hence, this guide to understanding the sales cycle will also mention the exit criteria for each stage.
1. Prospecting for Leads
The first stage in any sales cycle is to hunt for people in your target persona and validate their interest in the product or their need to purchase the product. This is known as prospecting for leads.
Things to keep in mind while prospecting are:
Know your ICP: Knowing your ICP (Ideal Customer Profile) is mandatory to target the right people without wasting time and resources. Yes, expanding the search is usually the go-to move, but targeting folks who have no logical interest in your product is just a waste of resources. Your ICP should be buyer personas with a great need for your product and ones that can reasonably think of investing in it. Find the people in that company with reasonable decision-making power regarding your domain, and they should be your target market.
Set up inbound funnels: For B2B SaaS businesses specifically, setting up content and lead magnets to bring your target market to your website can be extremely useful. Especially in SaaS, keeping your ICP lurking around your product raises awareness and pays off in the long term. Interested customers fill in their details on your website, which can then be used by the sales team to nurture those leads. Email marketing is also essential to create leads and awareness.
Always conduct initial qualification: Even among the pool of potential customers falling into your ICP, there still needs to be more filtering done to make the pool ready for contact. Ensure ICP requirements are met, and there are reasonable triggers exhibited to demonstrate interest.
This information can be known either through initial research or by directly engaging with the lead through email or phone calls. The prospecting can be said to be over once contact information has been gained, the prospect lies in your target pool, and there are no obvious red signals.
2. Connecting with Prospects
Once you have a pool of leads that fall into your ICP and from whom you can reasonably expect good responses, it is time to make first contact. The best way method for initial contact is to offer assets, such as e-books and templates, that cater to their business problems.
Here are some things to keep in mind:
Don’t sell at this initial stage: Always keep in mind that you’re a stranger to prospects at this stage, hence, the conversation’s point shouldn’t be selling- rather- focus on getting to know the prospect better and building a rapport. Marketing assets can be a great tool to get the conversation about business problems started.
Use the right channels: In the modern era, there is no such thing as too many conversations. Email outreach performs the best when gauged based on long-term consistency. However, LinkedIn, social media platforms, and business communities are also superb for building relationships.
Gauge their interest to score leads: Depending on the prospects’ response and problem statement, gauge how likely it is that they invest in your product. The highest-rated leads should be the primary targets for the next stages.
Most common objections at this particular stage include- "Call me back in a few months" "We're not interested" "I'm not the right person" "We're happy with our current solution"
The connection stage blends into the qualifying stage where you pitch the questions based on what you are preparing to sell.
Pro Tip 💡: Sales engagement software can greatly improve efficiency in sales communication- including automated follow-ups, multi-channel cadences, etc.
3. Qualifying
A proper connection with prospects should give the sales team an idea of how to get answers to 4 important questions that need to be answered. This is the BANT acronym for sales qualification.
BANT stands for Budget, Authority, Need, and Timeliness. These serve as the 4 major qualification criteria.
Budget- The prospect should have an adequate budget to spend on solving the problem your product solves.
Authority- It is best to connect and nurture the person who has the buying power in regard to your product.
Need- The prospect should have a clear-cut need for your product or clear-cut pain points that you can solve.
Timeliness- The time to sell should be right. Most conversions are from prospects who are willing to purchase in the near future. Those leads should be prioritized going forward in the cycle.
Qualifying is the most important step in determining the efficiency of the sales cycle. If intent is gauged correctly and the qualification process is accurate, then a lot of time is saved otherwise spent on chasing prospects who would never convert.
Common objections at this stage are- "We don't have the resources to implement" "Our current process works fine" "I need to check with my team/boss first"
Once prospects are accurately scored, they can be moved forward in the sales cycle, with prospects satisfying all the qualification criteria being at the top of the list.
Pro Tip 💡: As long as a need for the product can be identified in the prospect, nurturing and communication should not be stopped. Eventually, this is the pool that has the most future potential. A flexible and nimble sales attitude can be a differentiating factor in SaaS.
4. Nurturing the Lead
Nurturing the leads is the process of getting them ready to purchase. As such, this stage focuses heavily on making them aware of the problem, your value proposition, industry insights, etc. Nurturing- unlike the second stage- should revolve more around the product and the core problem your product wishes to solve, as this is the stage building up buying intent.
While nurturing, the sales team is trying to build a reputation for their product, and how effective it is in solving problems faced by the prospect. A lot of dynamism is needed in this stage. Prospects who show no buying intent should be separated and nurtured separately- by providing more assets, routinely following up, and not forcing the sale. Top-of-the-mind awareness (TOMA) is your friend- when the prospect does come around to the idea of investing to solve the problem- you should be the first one on their mind.
Once the need for your product is clearly established and received, a sales opportunity is created- which signals the time to present the offer.
Pro Tip 💡: Sales enablement is crucial to smoothly sail through the various stages of the sales cycle. The sales team should always have assets and tools that help them sell better.
5. Proposal
This is the stage where you present a clear, targeted, and customized offer to the prospect. It should have all the terms and conditions clearly outlined and should meet the specific needs of the prospect.
This is the stage where your sales team needs to be at their creative best. If all the previous steps have been implemented correctly and gone smoothly, then the sales team should be in a position where the prospect has the buying power, budget, need, and intent to purchase in the near future.
Common objections at this stage are- "This seems like overkill for our needs" "We need additional features" "Your competitor offers more functionality"
Thus, presenting the offer is the hook to capture the prospect and make them a customer. Once the prospect analyzes the offer, there are sure to be objections.
6. Pricing Negotiation
Rarely does a prospect accept the offer without certain rebuttals, especially with the pricing. This is the stage of negotiation, where the prospect and the salesperson air their demands and expectations and try to reach an agreement on the pricing, terms and conditions, and the timeline of the deal.
Common objections at this stage are - "Your competitor is cheaper" "We need better payment terms" "I can't justify this cost to management"
It is necessary to ensure that an urge to get to closure does not undermine the potential value of the deal. More often than not, trying too hard is what causes deals to go south. The customers are looking for confidence, and your value proposition should be reflected in your pricing.
7. Closure and Customer Success
It is perfectly normal to lose out on deals, even after all the prior steps go smoothly. The important thing is to curate an experience at this stage that eventually leads to closure — maybe not immediately — but definitely. The most common barrier to sale at this point is the timing not being right for the prospect.
If the prospect agrees to the offer and is ready to sign the contract — congratulations! You’ve got yourself a new customer, and if not, keep nurturing the lead, answering more questions, and waiting for the right time.
How to Measure Your Sales Cycle
Measuring your sales cycle refers to calculating the average time your sales team takes to take prospects through the entire sales cycle and make them a customer.
According to research done by Hubspot, the average length of the SaaS sales cycle is 84 days. For an ACV (Annual Contract Value) less than $5,000, the sales cycle industry average reduces to around 40 days, increasing to around 170 days for an ACV above $100,000.
However, one should keep in mind that the length of the sales cycle does not adequately reflect the quality of sales. Sure, a shorter sales cycle may seem like the way to go, but depending on the particular needs of different businesses, there are different answers. Efficiency improvements in sales processes should be considered primary, and the improvements they have in shortening the sales cycle should be secondary.
Here is the general formula to measure the length of your sales cycle-
Sales Cycle Metrics and KPIs
Certain key metrics and KPIs (Key Performance Indicators) can help introduce more efficiency in the sales cycle as they depict the performance of the established processes.
The main metrics to track for determining the effectiveness of your sales cycle are-
Sales cycle length: This is the time taken by the sales team to make new customers. It is the average number of days taken to close any deal from start to finish. Key takeaways from this metric can be the relationship between sales cycle length and type of customer, contract value, etc. The effect of different tactics on sales cycle length can also be studied.
Sales growth rate: This is the increase in sales revenue from any previous period to the current period. A growing and thriving sales team should keep increasing its sales revenue and have a positive revenue growth rate otherwise may suggest process drawbacks and hurdles.
Lead conversion rate: Perhaps the most important metric for assessing the quality of the sales team, the lead conversion rate refers to the percentage of leads converted to customers from a given generated pool of leads. Proper sales enablement and sales training can improve lead conversion signaling an increase in the ability to convince prospects.
Sales velocity: Sales velocity is a measure of how quickly deals are moving through your pipeline. It is a great metric to figure out where your sales processes are lacking, and what improvements in efficiency are to be made to make the sales cycle smoother.
What is Sales Cycle Management?
Sales cycle management refers to the process of overseeing, improving, and optimizing the sales cycle and its various steps to keep the sales engine of an organization running and growing smoothly.
Sales cycle management is a crucial top-level function usually carried out, controlled, and directed by the Chief Sales Officer (CSO) or the Sales Director. It is thanks to this function that companies can align their sales activities to market trends, advancements in technology, etc.
The primary practice for good sales cycle management is to get your CRM game right. Once good CRM practice and hygiene are established, other automation tools can be connected to it to introduce more efficiency.
Your sales cycle should be closely correlated to the opportunity stages. This helps a lot in progressing deals smoothly through the pipeline, and ensuring that proper accountability of deals is undertaken at each stage.
What are the best practices for sales cycle management?
Align sales and marketing: Ensure that your sales goals and marketing goals are clearly aligned and feed into each other’s functions. For example, a clear target of marketing-qualified leads (MQLs) that feeds into the sales cycle at the prospecting stage. Additionally, both these teams should be closely aware of each other’s activities, resulting in peak sales enablement by the marketing team, and full capture of the marketing-generated interest by the sales team.
Automate everything: Most sales reps have to spend a lot of time in non-sales activities such as keeping track of commissions, scheduling meetings, sending follow-ups, etc. Use automation tools and software to cut down on this time as much as possible. For example, using incentive compensation software, such as Visdum, can cut down on time spent chasing after commissions significantly.
Map the buyer’s journey: Targeting the right ICP is not enough anymore. Sales teams should keep the journey of the buyer in mind while curating a selling experience to influence buyer behavior. This means standardizing steps to take the prospect through, assets to be provided, structure of the website, etc. Alignment of sales and marketing is crucial for creating a good journey for the customer.
Track, adapt, and improvise: Sales cycle management is not a one-and-done activity. Continuous improvements, tests, and improvements are required based on changes in the market, metrics, and other affecting factors.
Use social proof: If the customer has trust and credibility in your name before they enter the selling cycle, half the job to be done by the sales team is already done. Use reviews, UGC (User-generated content), and social media to gain and present social proof of your positive impact.
Wrapping Up
A sales cycle gives structure to the sales process. Sure, a few customers can be onboarded without much of a standardized process or procedure, but when it comes to sustainably scaling and ensuring repeatability of sales, every business needs to establish a sales cycle loaded with trained sales processes.
In the modern era where technology and AI tools are available at large, there is a lot of scope for automation in the sales cycle. Sales engagement software makes prospecting and connecting with leads easier, lead generation software makes prospecting and scoring leads much easier, and so on. Even customer success is much more accessible and measurable thanks to technological advancements. On top of this, sales behavior can be encouraged and directed by using incentive compensation management software.
It’s clear that the better the sales process, cycle, and behavior, the better the sales revenue and success of the business.
FAQs
What is the sales cycle?
A sales cycle is the set of steps taken to convert a prospective customer into an actual customer. It involves prospecting for leads, curating interest, qualifying the lead, nurturing the relation, and closing the deal to make a new customer.
How to calculate the sales cycle?
The length of the sales cycle can be calculated as the average number of days taken to close each deal. This can be obtained by adding the total number of days taken to close each deal, and dividing the result by the number of deals closed.
What is the sales cycle date?
The sales cycle refers to the time it takes or the number of days it takes to identify a potential customer, qualify them, pitch them an offer, and make them a customer. It is the length from the start to the end of a sale.
What are the 7 steps of the sales cycle?
The 7 steps of a sales cycle are- 1. Prospecting 2. Connecting 3. Qualifying 4. Nurturing 5. Offering 6. Negotiating 7. Closure. These steps might not be demarcated, and some may be entirely skipped in the sales process, but they are the basic outline of creating a new customer, i.e., a sales cycle.
What is full cycle sales?
A full cycle sales model is one where a single rep is responsible for managing the entire sales cycle for a particular customer, i.e., prospecting stage to closure stage- all done by a single salesperson.
What are the 4 steps in the sales cycle?
A 4-step model of the sales cycle has these elements- 1. Generate Leads, 2. Qualify and Move 3. Convince and Negotiate 4. Close. It outlines the basic activities required in a sales cycle, which are lead generation, qualification, evaluation, and closure.
What is the 360 sales cycle?
A 360-degree sales cycle is one where the customer has multiple touchpoints with the company, be it through sales communications or marketing communications. The goal is to inform the customer more thoroughly and gain insights into their behavior and intentions more thoroughly as well. It also includes fostering relationships for future benefit and happier customers.
What is a sales process?
A sales process is the recurring set of actions that a sales representative takes to move a prospect along the sales cycle. It involves approach, connection, presenting the offer, handling objections, closure of the deal, and then customer success as well.
What is the difference between a sales cycle and a sales funnel?
A sales funnel is the journey of leads getting captured and qualified- it is a funnel since there are fewer available leads after each qualification step- whereas a sales cycle is the journey of each deal- the processes from start to finish.
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