Average sales cycle is an important sales metrics for sales managers. For one, the average sales cycle length allows you to measure the time it takes for a lead to move through your sales pipeline, from initial contact to final conversion.
Key Takeaway: Understanding how to calculate the length of your sales cycle will provide valuable information and insights into how efficient your sales management and sales automation processes are. It is also important in sales forecasting and predicting your revenue growth.
Let’s say you own a restaurant business that sells seafood dishes, and your restaurant manager determined that your average sales cycle length is relatively long. This suggests that potential customers might take some time to consider their dining options before visiting your establishment.
With this knowledge, you can revisit your restaurant business marketing strategies, implement efficient business systems, and invest in restaurant tech and other sales automation tools that will shorten the sales cycle. As a result, you can remove irrelevant strategies from your sales pipeline and leverage on B2B vs B2C sales processes that work.
Read on to learn how to calculate the average length of a sales cycle.
What is an Average Sales Cycle?
An average sales cycle is the amount of time it takes for a prospective customer to move through the entire sales pipeline, from the first contact to final sale. It is a sales metric that shows whether the sales team efforts are paying off or not.
There are different stages in an eCommerce sales cycle, including lead generation, lead qualification, needs assessment, proposal, negotiation, and finally, closing the deal. The length of your sales cycle is simply the amount of time a lead spends at each stage before converting.
With the insight you get from this sales metric, you can identify bottlenecks or snags in your sales process and fix it appropriately. It may be that you’re spending too much time on certain stages, like the lead generation stage, or there’s a hiccup in the customer journey that’s slowing things down, like forgetting to send follow-up messages.
For instance, in the food and beverage industry, the average sales cycle depends on a number of factors, like the type of food service business or how complex the menu design is. The sales cycle may be relatively short for quick-service restaurants or curbside pickups.
In this case, you can focus on providing a seamless and efficient online ordering process. From optimizing your eCommerce website and implementing digital menu management systems to streamlining the way you accept payments online and customizing pickup and delivery options, you can make the sales cycle length even shorter.
On the other hand, fine dining restaurants might have longer cycles due to the careful planning and table/group reservations involved. This means customers are spending longer time in the sales pipeline.
You can focus on providing a personalized and immersive experience throughout the extended sales cycle to enhance customer satisfaction. For instance, you can make the restaurant reservation process as seamless and personalized as possible by implementing a user-friendly online restaurant reservation system.
Another way to capitalize on the longer sales cycle is by engaging customers before they visit. You can send custom eCommerce email marketing campaigns to provide a glimpse of the dining experience they should expect, such as an exclusive seasonal menu or the chef’s specialties.
As you can see, knowing the average sales cycle can have a significant impact on enhancing the customer experience and boosting your revenue, no matter the industry your business is in.
Why Calculate the Average Sales Cycle Length?
Calculating the average sales cycle length is like peering into the DNA of your sales process. It allows you to analyze and measure how long, on average, it takes for a prospect to progress from the initial contact stage to becoming a paying customer.
Understanding this timeframe can provide several benefits:
- Better Sales Forecasting: When combined with other factors like lead generation, conversion rates, and market conditions, the average sales cycle length provides a more accurate forecast. By knowing the average sales cycle length, you can estimate when deals are likely to close, allowing you to forecast your revenue more accurately.
- Effective Resource Allocation: Understanding how long it takes to convert leads into customers helps you allocate your time, energy, and resources more efficiently. If your sales cycle tends to be longer, you may need to allocate more time, effort, and resources to nurture leads and guide them through the pipeline. By accurately estimating the duration of the sales cycle, you can optimize staffing, budget allocation, and wholesale inventory management.
- Performance Evaluation: Comparing the actual length of your sales cycles to the average can help you identify areas of improvement and evaluate the effectiveness of your sales strategies. For instance, if your average sales cycle is longer than expected, it may indicate inefficiencies in lead qualification, sales follow-up, or closing techniques. Evaluating and optimizing these areas can help streamline your sales process and increase eCommerce conversion rates.
How to Calculate Average Sales Cycle Length
Now, let's jump into the nitty-gritty of calculating the average sales cycle length!
Step 1 - Define the Start and End Points
Determine the specific stages in your sales process that you consider as the start and end points of the sales cycle. For example, the start point could be when a lead first enters your pipeline or when they express interest in your product or service. The end point can be when the lead converts into a paying customer or completes a specific action, such as making a purchase.
Step 2 - Track Time Duration
Keep a record of the time it takes for each lead to move from the start point to the end point. This can be done manually by recording dates or using a wholesale CRM (Customer Relationship Management) system that tracks and timestamps each stage of the sales process.
Step 3 - Calculate Individual Sales Cycle Lengths
Subtract the start date from the end date for each lead to determine the duration of their sales cycle. This will give you the length of time it took for each specific lead to convert.
Step 4 - Sum the Sales Cycle Lengths
Add up the individual sales cycle lengths for a specific period, such as a month or quarter. This will give you the total cumulative time it took for all the leads to convert during that period.
Step 5 - Determine the Number of Conversions
Count the number of leads that successfully converted into customers during the same period.
Step 6 - Calculate the Average Sales Cycle Length
Divide the total cumulative time (from step 4) by the number of conversions (from step 5). This will give you the average sales cycle length for that specific period.
For example, if the total cumulative time is 90 days and there were 10 conversions during that period, the average sales cycle length would be 90 days divided by 10, which equals 9 days.
Remember, it's important to track the sales cycle consistently over time to gather enough data for a meaningful average. Additionally, you can analyze the average sales cycle length by different segments, such as specific products, customer segments, or eCommerce marketing channels, to gain further insights and optimize your sales strategies accordingly.
7 Tips on Improving Sales Cycle
While calculating the average sales cycle length is valuable in itself, the real magic happens when you use this information to enhance your sales process.
Here are a few tips to help you streamline your sales cycle and boost your conversion rates:
- Qualify Leads Effectively: Implement a robust lead qualification process to focus your efforts on leads with the highest potential for conversion. Clearly define your ideal customer profile and establish criteria for qualifying leads. This ensures that your sales team is targeting the right prospects and avoids wasting time on leads that are unlikely to convert.
- Streamline Sales Processes: Review and streamline your sales processes to eliminate unnecessary steps and bottlenecks. Identify areas where the sales cycle tends to get delayed or stuck and find ways to simplify or automate those processes. Look for opportunities to automate routine tasks, utilize sales technology tools, and provide your sales team with the necessary resources and training to work efficiently.
- Enhance Communication and Follow-up: Communication is key throughout the sales cycle. Ensure that your sales team maintains consistent and timely communication with leads. Implement a structured follow-up process to nurture leads and address any questions or concerns they may have. Personalize your communication to show genuine interest and understanding of their needs, which helps build trust and strengthens relationships.
- Leverage Sales Technology: Utilize sales automation and customer relationship management software to streamline your sales processes and improve efficiency. These tools can help automate tasks, track interactions with leads, provide analytics for data-driven decision-making, and enable better collaboration within your sales team. Choose tools that align with your specific needs and integrate well with your existing systems.
- Provide Sales Training and Support: Invest in training and development programs for your sales team. Equip them with the necessary product knowledge, sales techniques, and objection-handling skills to effectively engage with leads and close deals. Regularly provide feedback and coaching to help them improve their performance. Additionally, ensure that your sales team has access to the resources, tools, and support they need to excel in their roles.
- Analyze and Optimize: Continuously analyze your sales cycle metrics and performance data to identify areas for improvement. Monitor key indicators such as conversion rates, time spent at each stage, and win-loss ratios. Identify patterns or trends that indicate areas of strength or weakness and take proactive steps to optimize your sales processes accordingly. Regularly review and refine your sales strategies based on the insights gained from data analysis.
- Foster Customer Relationships: Cultivate strong customer relationships to drive repeat business and referrals. Focus on providing exceptional customer service throughout the sales cycle and beyond. Engage with customers post-sale, seek feedback, and address any issues promptly. Building long-term relationships with customers can lead to upselling opportunities, positive word-of-mouth, and increased customer loyalty.
Frequently Asked Questions About Average Sales Cycle
What is KPI for sales cycle?
The eCommerce KPIs for sales cycle include:
- Average sales cycle length
- eCommerce conversion rate
- Sales velocity
- Lead-to-customer ratio
- Sales funnel conversion rates
What is B2B vs B2C sales cycle?
B2B sales cycles tend to be longer and more complex because it involves multiple decision makers, a thorough evaluation of business needs, and contract negotiations. B2C sales cycles, on the other hand, have a shorter length and the decision making process is simpler.
What is D2C sales?
D2C or direct-to-consumer sales refer to selling products or services directly to end consumers without involving intermediaries such as retailers or wholesale businesses. This approach allows businesses to have more control over the customer experience, pricing, and branding.