The average sales cycle length and learning how to calculate it is an important aspect of sales and something salespeople learn when undergoing sales training courses.
This post covers what is the sales cycle, the average length, and how to calculate the average sales cycle length.
Average Sales Cycle Length Defined
The sales cycle is a process whereby a salesperson turns a prospective buyer into a customer.
The average sales cycle refers to the average amount of time it takes for a prospective buyer to initially make contact with your company to close the sale. The average sales cycle length varies according to industry.
Average Sales Cycle Length
The average sales cycle length for most B2B businesses is 6-12 months.
The average length of a sales cycle depends on the product or service required and the industry itself. The sales cycle may be 90 days or less, if decisions are to be made through various stakeholders of a company, a decision may be reached in 6-12 months, although this varies across B2B sectors.
How To Calculate Average Sales Cycle Length
Calculating the average sales cycle length is a simple calculation.
Average sales cycle = total days/ deals won
- Add up all sales closes for a designated period.
- Add up the total number of days it took to close each sale.
- Take the total number of days and divide by the number of deals.
Here is a practical example of how to calculate the average sales cycle:
Total Number Of Deals: 1+1+1+1+1+1+1 = 7
Total Number Of Months: 12+7+16+9+20+6+8 = 11
Average Sales Cycle: 78/7 = 11 months
The average sales cycle length in the example is 11 months.
Why Should You Calculate The Average Sales Cycle Length?
The reasons for calculating the average sales cycle length are as follows
- Provides insights into the sales process
- Improves revenue forecasting
- Able to utilize resources more efficiently
- Allows for comparison of industry standards
Factors Influencing The Length Of The Sales Cycle
Several factors affect or influence the length of a sales cycle. Knowing which factors influence the length of your sales cycle helps you improve sales efficiency and increase sales throughout the company.
Product Or Service Complexity
The product or service complexity is a factor when determining how long the sales cycle is going to be. A small business owner purchasing Quickbooks to help manage their finances will have a difference sales cycle than a multinational company purchasing SAP software for their firm.
A small business owner only has one decision-maker. A multinational company has many. B2B sales for large organizations can take 12 months to decide on which software to install on the computers to manage inventory because of all the stakeholders involved and whether the software works without issues on the computers.
Price Point
The price point of a product or service is another factor that affects the sales cycle length. Accounting software at $10/ month will have a shorter sales length than $350,000 software update. The more expensive something is, the more decision-makers are going to be involved.
Sales Rep Experience And Expertise
The skills, experience, and expertise of the sales rep is an important factor. Some sales reps have mastered the art over many years in sales. If they also possess the technical knowledge of the product, the sales skills and experience, their average sales cycle will be shorter than other sales personnel.
Industry
The industry or sector tends to affect the length of the sales cycle. This is primarily due to the number of stakeholders involved.
Size Of The Company
A large company will have more complex buying decisions as all stakeholders need to approve the product or service.
Competition
The sales cycle length depends on the amount of competition. This is because a buyer will compare prices and compare products to negotiate better pricing or finance terms.
Efficiency In Sales Process
A more efficient sales process would improve the speed of the sale. This would lead to a reduction in the average sales cycle length.
Market Awareness
It is easier to sell to a potential customer base that is well aware of your product or service. If they aren’t, they may feel the need to look elsewhere. Building brand trust and educating potential customers about the benefits can help speed up the sales cycle.
Customer Needs And Requirements
Customers that require a custom solution would have a longer sales cycle because the custom solution has to be created from scratch. It is time-consuming to create this specialist solution.
Why Technology Companies Should Focus On Average Sales Cycle Benchmarks
Technology companies should focus on average sales cycle benchmarks because they indicate whether they are on or off track. If the deal starts to drag out, you know something is wrong. Was there a change in priorities, criteria, management, competitors gaining ground, or raising money, or did the sales rep not ask the right questions? – Andy Miller
Technology companies should focus on average sales cycle benchmarks because these metrics provide crucial insights that drive strategic decisions and business success. Here’s why they matter:
- Performance evaluation – Benchmarks allow companies to measure their sales efficiency against industry standards. A sales cycle significantly longer than the benchmark may indicate process inefficiencies or sales strategy issues.
- Resource allocation – Understanding your average sales cycle helps properly staff sales teams and allocate marketing resources across the pipeline. This prevents overinvestment in early-stage prospects that won’t convert quickly.
- Revenue forecasting – Accurate sales cycle benchmarks enable more precise revenue predictions. When you know how long deals typically take, you can build more reliable financial projections.
- Process optimization – Identifying which stages of your sales cycle deviate from benchmarks helps pinpoint specific improvement areas. This targeted approach is more effective than general sales training.
- Customer experience improvement – Analyzing sales cycle length can reveal friction points in the buying process. Addressing these improves the customer journey and can increase conversion rates.
By tracking these sales metrics against industry benchmarks, technology companies can make data-driven decisions about their go-to-market strategy, pricing models, and product roadmap priorities.
Conclusion
Knowing what the average sales cycle length is and how to calculate it helps forecast revenue, creates insight into the company’s sales process, improves performance standards, and identifies which industries are the most beneficial to work in.
Navigating a stalled pipeline often requires the outside perspective of an expert sales training consultant. We help sales leaders diagnose bottlenecks and implement the ’21 Core Competencies’ needed for sustainable growth.