Sales cycles, the time from acquiring a lead to closing an account, vary quite a bit by industry, product type, and price point. But universally speaking for startups, shorter sales cycles are better. Maintaining a short sales cycle is a competitive advantage for several important reasons.
First, faster sales cycles accelerate the discovery of a repeatable sales process. Different sales approaches must be tested: which role to sell to? which pitch (cost or value)? how to handle particular objections? A 45 day sales cycle will find those answers twice as fast as a 90 day sales cycle. Faster and more frequent sales cycles enable quicker experimentation and ultimately a more rapid discovery process to the right initial sales process.
Of course, this also extends to marketing. Faster cycles mean the quality of different lead sources can be evaluated nimbly and marketing experiments require less time to conclude.
Second, faster sales cycles enable a company to more rapidly evaluate new sales candidates. With 45 day sales cycles, an inside salesperson’s performance can be evaluated in the first 4-6 months of their tenure. Six months is four full sales cycles back-to-back. If a sales rep can’t close a few deals in that process - they aren’t a fit.
Third, faster sales velocity (the number of deals closed in a given month) is an incredible motivator. If sales cycles are short, account executives can quickly establish a sense of momentum, which makes the whole organization feel like it’s humming.
Fourth, the faster the sales cycle, the faster the product improves. A startup develops a product offering and then takes it to market through its sales team. The sales team reverts back to the product team with market feedback. The quicker market feedback can be consistently incorporated into the roadmap, the more rapidly a company can improve its product.
Fifth, faster sales cycles simplify financial planning. The company has better bookings and revenue predictability, which means they can more accurately forecast when to increase the size of the sales teams, when to increase marketing budgets, and so on. Predictable businesses are more attractive to investors, which simplifies capital raising.
There are many other advantages to faster sales cycles. But I think this list is good enough to make the point.
Whether deliberate or not, many startups price their initial products at substantial discounts to their future price points or their competitors. Often, this is a shrewd move because it helps startups accelerate their product market fit feedback cycles.
Keep an eye on your sales cycles. Accelerating them can have a huge impact on your business.
Published 2015-04-16 in Sales