A sales cycle is the process that your company takes to sell your services and products. In simple words, it’s a series of steps that your sales reps need to go through with prospects that lead up to a closed sale.
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Why Understanding Sales Cycles Is Important?
A common misconception is to think that sales cycles are different depending on the industry. The reality is that the steps are the same.
The length of the cycle and the key metrics that each company tracks, however, are the factors that sales managers should keep in mind.
For example, there are industries where a prospect can turn into a customer within 30 days and others where it takes at least one year.
In the eye of an inexperienced person, sales might look a little bit different every day. Odds are, however, that there are patterns that repeat themselves through the lifetime of the sales cycle.
Although each situation might look different on the outside, there are steps and activities through which each prospect needs to go to become a loyal customer.
By defining these steps, organizations can create a winning process for their sales teams. Ignoring the fact that sales activities are not a combination of casual coincidences can lead organizations, of any size, to inevitable failure.
When managers understand how the sales cycle of the company in which they operate works, they can start setting up a series of activities that simplify tracking and optimization.
First of all, understanding the sales cycle of a company can help sales managers define the best performance management review for their teams. What key metrics should your team be evaluated on?
Then, having a full understanding of the customer journey from the first touchpoint to the contract signed can improve dramatically how the company deals with objections and internal bottlenecks.
What Are The Sales Cycle Stages?
Generally speaking, there are six stages that everyone should be aware of when thinking about sales cycles. Sometimes, you can add an extra one at the end, depending on whether referral is part of your daily routine.
The critical stages of a sales cycle
1. Research & Prospecting
Finding new prospects to fill in your sales team pipeline is going to be the lifeblood of your business. No prospects, no business. It’s as easy as that. Before identifying potential buyers, however, it is essential to have done good research on the type of buyer your organization wants to target, the so-called “buyer persona”.
In this step, you are not only generating leads, i.e., collecting contact information, but your sales reps also need to think at the best way to reach out to them as well as actually making the first contact.
2. Prospect Fit
Once your team starts to have conversations with potential buyers, there’s a need to understand whether or not this will be an ideal customer or not. Unfortunately, not all prospects are created equally. Each organization should develop a set of key metrics by which the ideal customer is defined.
After doing so, all new prospects your sales reps start to talk with will need to be evaluated against those metrics. The importance of this step is often undervalued and as a result companies start closing customers which brings little or no value.
3. Offer or Demo Presentation
Depending on the type of product/service your business offers, you might jump straight into the offer phase or go through a product demo first. Regardless of which comes first for you, this is a critical step for success. Most businesses often fail here by not customizing their proposal according to prospects’ needs.
If you present a generic offer and don’t respond to your prospect needs, you are wasting time. Even if your company can’t customize the solution selling, your reps should still tailor the offer to what the potential buyer is looking for. Understand what your prospect needs and then highlight your product or service advantages accordingly.
4. Objection Handling
There’s no sale without objections. It has been shown that actually there’s a 2% chance that someone will buy at the first attempt. On top of that, if a prospect jumps on buying a solution or product with no question, you might want to revisit the “Prospect Fit” step.
Objections are a natural part of the sales process; for this reason, your team should be well-prepared for them. There are common questions, such as price, timing, competition, and then there are others that might be specific to your industry or even company. The best approach to this is to be structured (like everything else in sales).
Create a document and let your sales team fill in all the objections that they face during the sales cycle. Review these regularly and group them into categories.
Then, every week or so, get the whole sales team together and let them work on a standard answer that satisfies both you and the reps.
In this way, you will let your team feel empowered in deciding how to respond to these, while at the same time overviewing how they position your company.
Lastly, working on objections can also help the tech team (if you have a product) developing features accordingly, so it might actually be a good idea to have now and then someone from the product team sitting in those meetings.
5. Negotiation
A natural evolution of the previous stage is to start negotiating with the prospect about contracts terms. This step can vary in time-length depending on the complexity of the solution you are selling.
On average, in a company with 100 – 500 employees, seven people are involved in a buying decision.
For this reason, it is essential for your sales team to have a good understanding, at this stage, of who are the decision-makers and ensure that they have all the information needed to make the right choice.
6. Closing A Sale
Most companies often mistake this part of the sales process with a formality and therefore underestimate its value. It’s vital for your sales reps to have a full understanding of your prospect’s mood now and to adapt the closing styles accordingly.
All the work your reps have done up until this point is what will determine the final note of this song. Often time, just by making sure all the paperwork is handled correctly and promptly can smooth this last stage.
7. Referral Generation
Asking for a referral is not necessarily part of the sales cycle. However, as a growing company most likely you are strengthening your brand every day by establishing yourself as a trustworthy partner with good products and services.
There’s no specific moment to ask for a referral. However, it is usually good practice after the sale is closed and the customer is happy with what you are providing. Remember to hold on asking for referrals if the client doesn’t seem fully on board with your solution.
Steps To Shorten Your Sales Cycle Management
Regardless of how well your organization is doing, there’s always room for improvement. Your sales team should continuously optimize their activities to shorten the time from one stage to the other.
1. Automate Repetitive Tasks
InsideSales showed that sales reps spend only a third of their time (35.2%) actually selling. That’s an average of 14 hours out of a 40-hour week. Improving the sales cycle is also about letting your sales team do what they are supposed to.
Automating repetitive and “low-value” tasks will allow reps to focus on selling and serving your prospect better, shortening the time between each cycle.
Implementing and configuring a CRM in the right way will help gather all the information in one place and make analysis and data processing simple.
2. Follow Up Consistently
Sales professionals know very well that establishing the first contact is just a small victory in the whole process. Following up, on the other hand, is what makes the difference. Prospects sometimes disappear and stop returning calls or even emails.
On average, five email follow-ups is the best number to move the prospect down the funnel, as a matter of fact, 50% of sales happen after the 5th touchpoint.
However, surprisingly enough, the average rep makes two attempts to follow-up with a prospect, and 44% give up after the first one.
3. Stay On Top Of The Cycle
One of the critical mistakes many sales reps do is to keep a deal “alive” for too long, but how long is too long? This changes from company to company and also from the industry. However, your sales managers should be aware of the average sales cycle length and the touchpoints cadence each lead needs.
Be aware though that sales reps don’t give up so easily on their leads, for this reason, evaluate follow-ups quality and strategy, and check effective interactions. Make sure no lead gets ignored but that there is a good lead recycling process to add fresh air in the pipeline.
4. Work On Incremental Wins
If you focus exclusively on the final sale, i.e., the contract signature, you might be putting too much pressure on your lead from the very beginning. Asking for small commitments to your prospects will make the whole process look less complicated.
Incremental wins should also be used to encourage sales reps to take small steps towards the bigger goal. Focusing on these reduce the pressure also internally and make the sales process more effective.
5. Focus On The Team
It is most likely that in your team, some of your sales reps are performing better than others. Take a look at what they are doing and create successful processes out of their daily routines that can be applicable to everyone else. Creating repeatable process is key to success. You don’t always need to reinvent the wheel, improving it is sometimes enough.
Sales funnels and flywheels: classic vs. platform business models
AIDA stands for attention, interest, desire, and action. That is a model that is used in marketing to describe the potential journey a customer might go through before purchasing a product or service. The AIDA model helps organizations focus their efforts when optimizing their marketing activities based on the customers’ journeys.
When building up a sales organization, it’s tempting to simplify too much. And while simplification does help.
It’s important to also have a model or representation of the various ways customers or potential customers get to know us.
In a traditional, AIDA model the customer gets to know us through a cycle of attention, interest, desire, followed by action. It’s important to remark, that this is a linear model and as such, it does not exist into the real world.
However, it is useful for one thing, it makes us guess at which stage of the journey our potential customer might be in, and therefore it makes us prioritize on certain actions over others.
At that point, following a sales funnel, like the AARRR will help us prioritize some of the actions we are looking at.
Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.
While the traditional sales funnel, makes us identify and prioritize the actions of the sales team. On the other hand, it’s important to have a solid mental model, for when it makes more sense to use a funnel rather than a different model.
The more you move from consumers to enterprise clients, the more you’ll need a sales force able to manage complex sales. As a rule of thumb, a more expensive product, in B2B or Enterprise, will require an organizational structure around sales. An inexpensive product to be offered to consumers will leverage on marketing.
For instance, based on the matrix above, an organization more skewed toward marketing, will also follow more of a flywheel model, where scale is more important than the quality of each lead.
The sales funnel is a model used in marketing to represent an ideal, potential journey that potential customers go through before becoming actual customers. As a representation, it is also often an approximation, that helps marketing and sales teams structure their processes at scale, thus building repeatable sales and marketing tactics to convert customers.
The same applies to freemium business models (we can call it such when the whole organization is aligned around the freemium offering), where on top of the funnel there is a wide number of leads.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
Through automation and also the experience of salespeople it’s possible to transform the freemium into a freeterprise, and also from a wide funnel acquire enterprise customers for the company:
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
Key takeaways
To shorten the sales cycle is fundamental first to get a good understanding of it and align your whole team on what’s needed to be done. Having clear what are the steps in your company (and industry) sales cycle will allow you to work on continuous improvements to shorten your way to repeated and scalable success.
Sales activities should be process-oriented and planned very well. Implementing and repeatedly testing processes will help your sales reps improving their daily contribution and conversation rate. Creating sustainable growth is the key to long-term success for your company.
Co-author: Luca is an experienced sales executive and business coach with a background of over 10 years in sales and management. When not working, Luca runs one of the leading online magazines for startup knowledge, MyStartupLand, with the aim of providing meaningful and helpful content to startup founders and business people.
Key Highlihgts
Sales Cycle Definition: Process of selling services and products in steps.Importance of Understanding Sales Cycles: Optimizing sales activities, performance management.
Universality of Sales Cycles: Similar steps across industries, varying lengths.
Primary Sales Cycle Stages:
Research & Prospecting: Identify prospects and initiate contact.
Prospect Fit: Evaluate prospects based on defined metrics.
Offer or Demo Presentation: Present tailored proposals.
Objection Handling: Address and categorize objections.
Negotiation: Negotiate terms and identify decision-makers.
Closing A Sale: Finalize sale based on prospect mood.
Optional Stage:
Referral Generation: Request referrals from satisfied customers.
Shortening the Sales Cycle:
Automate Repetitive Tasks: Use CRM to streamline sales activities.
Follow Up Consistently: Persistent follow-ups to move prospects forward.
Stay On Top Of The Cycle: Avoid prolonged deals and maintain cadence.
Work On Incremental Wins: Obtain small commitments for progress.
Focus On The Team: Learn from top performers and create repeatable processes.
Sales Funnels vs. Flywheels:
Sales Funnels: Linear buyer journey from attention to action.
Flywheels: Prioritize scale over lead quality, common in freemium models.
Freemium to Freeterprise Transformation: Convert free users to paying enterprise customers through automation and effective sales strategies.
Business development comprises a set of strategies and actions to grow a business via a mixture of sales, marketing, and distribution. While marketing usually relies on automation to reach a wider audience, and sales typically leverage a one-to-one approach. The business development’s role is that of generating distribution.
The more you move from consumers to enterprise clients, the more you’ll need a sales force able to manage complex sales. As a rule of thumb, a more expensive product, in B2B or Enterprise, will require an organizational structure around sales. An inexpensive product to be offered to consumers will leverage on marketing.
A sales cycle is the process that your company takes to sell your services and products. In simple words, it’s a series of steps that your sales reps need to go through with prospects that lead up to a closed sale.
RevOps – short for Revenue Operations – is a framework that aims to maximize the revenue potential of an organization. RevOps seeks to align these departments by giving them access to the same data and tools. With shared information, each then understands their role in the sales funnel and can work collaboratively to increase revenue.
In negotiation theory, BATNA stands for “Best Alternative To a Negotiated Agreement,” and it’s one of the key tenets of negotiation theory. Indeed, it describes the best course of action a party can take if negotiations fail to reach an agreement. This simple strategy can help improve the negotiation as each party is (in theory) willing to take the best course of action, as otherwise, an agreement won’t be reached.
In negotiation, WATNA stands for “worst alternative to a negotiated agreement,” representing one of several alternative options if a resolution cannot be reached. This is a useful technique to help understand what might be a negotiation outcome, that even if negative is still better than a WATNA, making the deal still feasible.
The ZOPA (zone of possible agreement) describes an area in which two negotiation parties may find common ground. Indeed, ZOPA is critical to explore the deals where the parties get a mutually beneficial outcome to prevent the risk of a win-lose, or lose-win scenario. And therefore get to the point of a win-win negotiation outcome.
Revenue modeling is a process of incorporating a sustainable financial model for revenue generation within a business model design. Revenue modeling can help to understand what options make more sense in creating a digital business from scratch; alternatively, it can help in analyzing existing digital businesses and reverse engineer them.
Customer experience maps are visual representations of every encounter a customer has with a brand. On a customer experience map, interactions called touchpoints visually denote each interaction that a business has with its consumers. Typically, these include every interaction from the first contact to marketing, branding, sales, and customer support.
AIDA stands for attention, interest, desire, and action. That is a model that is used in marketing to describe the potential journey a customer might go through before purchasing a product or service. The AIDA model helps organizations focus their efforts when optimizing their marketing activities based on the customers’ journeys.
Social selling is a process of developing trust, rapport, and a relationship with a prospect to enhance the sales cycle. It usually happens through tech platforms (like LinkedIn, Twitter, Facebook, and more), which enable salespeople to engage with potential prospects before closing the sale, thus becoming more effective.
The CHAMP methodology is an iteration of the BANT sales process for modern B2B applications. While budget, authority, need, and timing are important aspects of qualifying sales leads, the CHAMP methodology was developed after sales reps questioned the order in which the BANT process is followed.
The BANT process was conceived at IBM in the 1950s as a way to quickly identify prospects most likely to make a purchase. Despite its introduction around 70 years ago, the BANT process remains relevant today and was formally adopted into IBM’s Business Agility Solution Identification Guide.
The MEDDIC sales process was developed in 1996 by Dick Dunkel at software company Parametric Technology Corporation (PTC). The MEDDIC sales process is a framework used by B2B sales teams to foster predictable and efficient growth.
STP marketing simplifies the market segmentation process and is one of the most commonly used approaches in modern marketing. The core focus of STP marketing is commercial effectiveness. Marketers use the approach to select the most valuable segments from a target audience and develop a product positioning strategy and marketing mix for each.
The sales funnel is a model used in marketing to represent an ideal, potential journey that potential customers go through before becoming actual customers. As a representation, it is also often an approximation, that helps marketing and sales teams structure their processes at scale, thus building repeatable sales and marketing tactics to convert customers.
Venture capitalist, Dave McClure, coined the acronym AARRR which is a simplified model that enables to understand what metrics and channels to look at, at each stage for the users’ path toward becoming customers and referrers of a brand.
The general concept of Bootstrapping connects to “a self-starting process that is supposed to proceed without external input.” In business, Bootstrapping means financing the growth of the company from the available cash flows produced by a viable business model. Bootstrapping requires the mastery of the key customers driving growth.
The virtuous cycle is a positive loop or a set of positive loops that trigger a non-linear growth. Indeed, in the context of digital platforms, virtuous cycles – also defined as flywheel models – help companies capture more market shares by accelerating growth. The classic example is Amazon’s lower prices driving more consumers, driving more sellers, thus improving variety and convenience, thus accelerating growth.
Business storytelling is a critical part of developing a business model. Indeed, the way you frame the story of your organization will influence its brand in the long-term. That’s because your brand story is tied to your brand identity, and it enables people to identify with a company.
Enterprise sales describes the procurement of large contracts that tend to be characterized by multiple decision-makers, complicated implementation, higher risk levels, or longer sales cycles.
Outside sales occur when a salesperson meets with prospects or customers in the field. This sort of sales function is critical to acquire larger accounts, like enterprise customers, for which the acquisition process is usually longer, more complex and it requires the understanding of the target organization. Thus the outside sales will cut through the noise to acquire a large enterprise account for the organization.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
Zero to One is a book by Peter Thiel. But it also represents a business mindset, more typical of tech, where building something wholly new is the default mode, rather than building something incrementally better. The core premise of Zero to One then is that it’s much more valuable to create a whole new market/product rather than starting from existing markets.
Palantir is a software company offering intelligence services from governments and institutions to large commercial organizations. The company’s two main platforms Gotham and Foundry, are integrated at enterprise-level. Its business model follows three phases: Acquire, Expand, and Scale. The company bears the pilot costs in the acquire and expand phases, and it runs at a loss. Where in the scale phase, the customers’ contribution margins become positive.
Consultative selling is a sales approach favoring relationship building and open dialogue to adequately meet the needs of a prospective customer. By building trust quickly a consultative selling approach can help the customer better meet her/his expectations and the salesperson hit her/his targets more effectively.
A unique selling proposition (USP) enables a business to differentiate itself from its competitors. Importantly, a USP enables a business to stand for something that they, in turn, become known among consumers. A strong and recognizable USP is crucial to operating successfully in competitive markets.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
