One very common measure that companies use to gauge sales velocity is the average length of a sales cycle. This is normally measured in the number of days it takes to work an opportunity through the sales pipe- line and close the deal. There is a big difference, however, between shortening sales cycles and accelerating a buying process. The length of a sales cycle is a measure of the ‘things we do.’ Accelerating your customer’s buying process speaks to changing the rate at which they do the ‘things they do.’
Measuring Sales Cycles
Before you can shorten your average sales cycle-or rather have evidence to show that you’ve shortened it-you have to measure the length of each sales cycle accurately. Many companies use their Sales Force Automation (SFA) or Customer Relationship Management (CRM) system to track the length of sales cycles. A common approach is to simply count backward the number of days from the date the deal closed to the date the opportunity was first entered in the system. An alternative method is to count back from the close date to the date the opportunity was first forecasted. Either of these approaches does leave some room for ‘creativity.’
If I am a sales rep, and I am being judged or compensated on the average length of a sales cycle, what’s to keep me from ‘sandbagging,’ and not entering the contact info, or the forecast, until I get closer to the date that I think the customer will be ready to buy? This is not an indictment on any sales rep. The point of this example is that the measurement can be manipulated and can be quite subjective. If we can change the total elapsed time by simply changing when we start the clock, we may not actually be shortening anything.
There is one facet of measuring the sales cycle, however, that does have tremendous merit. It is based on the truth that . . .
Where performance is measured, performance improves. Measuring any human activity will cause those being measured to be more effective and efficient.
It’s human nature to want to do better over time. So, sometimes just the mere fact that we are measuring makes us work smarter and look for ways to drive time out of the process.
When I consult with clients to maximize sales force effectiveness, I recommend measuring sales cycles separately from prospecting cycles. A prospecting cycle is how long it takes to find, identify, and frame a sales opportunity. Then once the opportunity is framed, the sales cycle measures how long it takes to close the deal.
As a sales rep, you or I might spend twelve months networking and leveraging acquaintances to gain access to the CEO of a particular company. We might also need to meet with that CEO or other key executives more than once before we mutually discover a goal or an objective they are trying to achieve that we can help them with. A long average prospecting cycle is not such a bad thing if it promotes building relationships over time and earning access at levels that we might never reach if we wait for the director of IT to stop by our booth at a trade show.
My rule of thumb for when to start the clock ticking on a sales cycle is the day on which I am given an end date. That is, the date on which I frame an opportunity and the prospect tells me when they want to arrive at their desired point ‘C.’ Anything that happens prior to that is part of the prospecting cycle.
By breaking the whole process into two distinct measures (1) length of prospecting cycle, and (2) length of sales cycle, we can better identify where we need training, coaching, and/or changes in behavior to improve results. And human nature being what it is, as soon as you start measuring, you start seeing improvements.
Measurement is another reason the Process of Mutual Discovery is such a tremendous tool. When you map out the steps and hurdles involved in helping your customer move through their Selection and Buying Process, you will actually be preprogramming the duration of your sales cycle. Sure, there may be setbacks or additional hurdles that pop up along the way, but when your client works with you to plan out the process, the predictability and accuracy of sales forecasts improve dramatically.
Working the Right Opportunities
I often tell clients whom I consult with that the quickest way to reduce the average length of your sales cycles is to quit working on a bunch of those old junky deals in your pipeline that can’t or won’t close. Spend that time looking for some new opportunities that can close more quickly. Create for yourself a ‘Profile of the Ideal Client’ that defines the characteristics of a great sales opportunity: one that is in an industry for which you have strong references, one who is big enough to afford what you sell, and one who has certain requirements for which you have a strong solution.
In the Enterprise Resource Planning (ERP) business, we used to only work with prospects who already had an ERP system, and who had an observable and measurable business disparity that could drive the need for an upgrade. We learned, the hard way, that selling to a company who had never been down that road before was often more trouble than it was worth. When I sold Supply Chain Management (SCM) software, one of the defining characteristics of a good prospect was a company that had multiple manufacturing plants that could make the same product, or multiple warehouses from which they could ship the same product. The need to make extremely complex decisions about where the most cost-efficient place is to make something, or where to store it and ship it from to better balance supply with demand, was one of the key preexisting conditions that made SCM not just interesting, but critical.
I’m not saying that you shouldn’t pursue new markets or prospects that are less than perfect, but if the objective is to shorten the average length of your sales cycles, find your ‘sweet spot’ and sell there.
I urge you to look closely at each opportunity in your pipeline and ask, ‘Is this where I should be spending my time?’ I know it’s hard to walk away from anything that has even the slightest pulse, but we have to use our time wisely. Use the suggestions presented throughout this book to carefully qualify each opportunity. Take a clean sheet of paper and go down through the deals in your pipeline. Make each one earn its way onto a fresh list.
- Ask, ‘What goal or objective is this prospect trying to achieve, or what problem are they trying to solve? What is their desired point ‘C’?’
- Look for the six Action Drivers: Motive, Urgency, Return, Consequence, Means, and Risk, and make sure they are really strong enough to drive a purchase.
- Identify what and who is involved in your customer’s buying process, where they are in that process, and what else has to happen before they would be ready to buy.
- Determine who you believe will make the final Action Decision, and then do what is required to earn your way to that person or persons. If you exhaust every possibility, but cannot get there, don’t bank too heavily on winning that deal. Invest your time and effort in deals you can win.
With a little diligence and reflection, we can reduce the average length of sales cycles substantially. But let’s be reminded that all of the suggestions thus far in this chapter do not in any way address how to accelerate our customer’s buying process. For most of us, this requires a paradigm shift. It is akin to the change in thinking we made to focus on what our clients do in order to buy something, as opposed to what we do in order to sell something.
Shortening the length of our sales cycles is important, in that it speaks to our own effectiveness and efficiency, but we shouldn’t stop there. We need to learn to drive time out of our customer’s buying process in order to help them reach point ‘C’ faster, as well as maximize our own sales velocity, gross revenue, and profitability.