Sales are at the heart and soul of every business. Without money coming in, the energy required to sustain a company will eventually run out. So it’s important to optimize your sales cycle for efficiency and better performance.
Achieving your quota can be very challenging. There are so many variables at play just to close a deal. Make an error somewhere in the cycle and you can easily end up losing the customer. That’s why it’s important for sales managers to become intimately familiar with their sales cycle. There is always room for improvement and processes that could be streamlined to improve paid conversions.
We put together this comprehensive guide to explain what a sales cycle is and the role it plays in achieving your sales goals. By the time we’re finished here, you should have a better sense of the cycle and how each phase applies to your business. Plus we’ll be sharing a business insider’s tip on how to secure your leads with a simple scheduling technique, so the right people show up for your sales demos.
What is a sales cycle?
The phrase sales cycle refers to the steps that a business follows in order to close a sale for almost any product or service. Doing this has been shown to help sales teams define a clear, concise method for nurturing prospects to buy-in.
Once a sales cycle has been mapped out, you can isolate areas that need improvement and test out new approaches. As you experiment, you’ll begin to learn more about what works best for your business. Failures can be valuable when they are accompanied by success. The practices that do work for you then become an integrated part of the sales cycle.
Setting up clear guidelines is as helpful for your reps as it is for managing operations. They will see where they fit into the bigger picture and can provide important feedback on what’s working or what isn’t. This way you can build a cycle that works for both them and the customers. Setting quotas and incentives can also help you to evaluate their efforts and reward them accordingly.
In any sales cycle, you start with an initial phase of attracting prospects, begin qualifying them, and eventually convert some of them into customers. The total number of steps depends on the thought leader you’re studying and the model they use, but it’s generally accepted that there are seven steps.
To understand the sales cycle, it’s helpful to think about it’s close relative, the product life cycle. If that sounds confusing, you’ll soon understand how the two work together and impact your ability to hit maximum sales potential.
Where do you see the most growth in a product lifecycle?
Sales start climbing during the growth stage of the product lifecycle. This is when the product starts getting more and more attention from the market, and its acceptability increases.
This stage is particularly important for new and innovative products recently launched into the market as consumers start to understand their use and purchase more. Almost all financials, including the sales, revenues, and profits, begin to grow, and you start getting positive returns from your product.
During the product life cycle, when do sales begin to slow while profit levels are high?
Right after the growth stage, the product reaches maturity, and the profits hit a maximum level. After this, the sales start to decline, and the competition starts taking over.
This is where you tap into the market and earn as much as you can. When sales start to decline, and you eventually start to cut prices and offer discounts to get what is left of the market. And finally, you either exit the market or innovate again to get back in the game.
Key concepts for understanding the Sales Cycle
Now that we’re about to get into the seven distinct stages of a sales cycle, let’s define the key concepts first so that you don’t lose track later on.
This refers to the initial search for potential customers. Some companies place lead magnets on their marketing pages to attract prospects. However you connect with your prospects, this phase is about making initial discovery calls, identifying potential customers, building a database, and then move to the next stage.
This one is pretty self-evident. Outreach means to make contact with the target audience with a particular message, general information, or a call to action.
- Lead Qualification
Lead qualification means classifying potential leads based on how likely they are to buy your offering. Qualified leads are the ones that are the most likely to convert.
- Product Demos
A product demo is a live experience between a sales rep and a lead, highlighting your product or services. The purpose is to review the offering and talk about all the value it will delivers.
- Overcoming Objections
People inevitably have questions or resistance during the sales process. It’s important to track the most common objections the prospect may have about your product. If you don’t have this part figured out, you’ll miss out on a lot of business opportunities.
- Closing the Deal
Closing the deal means formally ending the bargain and reaching an agreement. Simply put, this is where the sale is confirmed, and the prospect agrees to buy.
- Drive Referrals
Getting your customers to bring in more customers is called driving referrals. The existing customers may be incentivized to tell more and more people about your product.
Understanding the Main Stages of a Sales Cycle
Now that we’ve identified some key ideas, let’s dive right into the seven main stages of a sales cycle.
Step 1: Prospecting
The word prospecting originally referred to digging for something precious and physical, like gold or silver. Sales teams adopted the idea, so that potential customers became the “territory” where sales reps scout for “gold”.
There are two main ways to generate prospects for your sales team. Outbound marketing focuses on cold calls and emails, meaning that the prospect is contacted directly. Inbound marketing works in the opposite direction, focusing on drawing people into the product offering through ads, landing pages, and email forms.
Remember how we offered a simple scheduling trick to retain higher quality leads? The scheduling strategy we’re going to suggest is based on inbound prospecting with forms and scheduling sales demos with the best applicants.
Sales prospecting is sometimes called lead generation, because qualified prospects are elevated to the status of a lead. The prospects who don’t qualify might be targeted again later for different products or services, so they still comprise an important part of your base.
When it comes to prospecting, it’s important not to rush the process. If a sales manager can find high quality prospects up front, their sales reps will have a better time closing deals. Managers are on the line to meet their quota, so there’s an incentive to gather good prospects. The later stages of the sales cycle won’t matter if you have poor quality prospects.
Step 2: Outreach
Outreach is where you make first contact and reach out to your prospects with an initial pitch. The communication channel may be through phone calls, emails, LinkedIn messages, social media, in-person meetings, or others.
You need to be careful not to bombard your prospect with the entire sales pitch at this stage of the cycle. Outreach, in most cases, only helps establish initial contact. The details can be sorted out later. You may introduce yourself and your business, share the value you can offer them, and ask if they would be interested in learning more about the product you’re selling.
This is also the step where you share your scheduling page with the prospect in order to streamline the booking process for your sales demo.
Step 3: Lead Qualification
Once you know that the prospect is interested in your offering, you can set up a qualifying call. Here, you will understand their specific needs and demands. If there’s a good fit, you can offer some potential solutions. But if the offer is not a good fit for them, they should be disqualified and will exit this particular sales cycle.
Before you make a qualifying call, make sure that you have done your research about the potential client and know exactly what to say. Try to stay in control of the conversation, avoid wasting their time, and be completely honest about your offering. By the end of the conversation, if you can establish that the prospect and your business fit together well, you’re safe to move on to the next stage.
Step 4: Product Demonstration
This is where a sales representative presents your product or service to the prospect and demonstrates how it can add value to their lives. The presentation should focus on how your product can help solve their specific problems and satisfy their needs.
Make sure that you are giving your presentation to the decision-makers who have the power to buy in. Also, be clear and confident about what you have to offer and then let the prospect make the final decision.
Step 5: Overcoming Objections
This is the most crucial stage of the cycle as it can make or break the deal. The lead may have objections to what you’ve shared or feel unsure whether they’re prepared to move forward with the offer. Your reps need to have responses prepared so they can be a guide through the uncertainty.
When a lead raises objections that your team wasn’t prepared for, it’s best to ask questions and try to figure out what the root problem is. Common points of objection include pricing, their own timelines and budget, comparisons to competitors, and confusion about your offer. Reps should be prepared to listen eagerly and do what they can to address their queries, while driving gently toward the desired outcome.
Step 6: Closing the Deal
Most of the work is done by this step and the rep should have an idea of what the answer is going to be. If they’re ready to close the deal, these final steps usually include completing paperwork, connecting with legal teams, discussing logistical details, and handling financial transactions.
If you are unable to close the sale, don’t worry since you were already able to take the prospect this far into the cycle. Chances are that they still have some objections or do not want to proceed with the purchase at this point. Make sure you keep in touch as such prospects typically do convert later on.
Step 7: Driving Referrals
This last step is what makes the sales cycle a circle rather than a straight line. The cycle doesn’t end once you’ve closed the deal. You need to make follow-up calls and stay in touch with the customer you just sold to. Help them out with any issues they face and then try to leverage the relationship to generate new customers. Word of mouth during the referral step can generate lots of new inbound opportunities for your sales team.
If you have a customer support or success department, be sure the sales rep makes an email introduction and that a proper hand-off takes place. This ensures that the customer always has a point of contact and feels taken care of.
The new business may be in terms of returning for repeat purchases or recommending your business to others. In both cases, make sure you keep nurturing the relationship post-sale, and you will eventually find opportunities to generate referrals or upsell them with newer offers.
How to measure KPI for your sales cycle?
When you’re operating in a market as competitive as today’s, simply rolling out your sales strategy and waiting for the results to come in does not work. You need to measure the performance of your sales cycle and optimize all stages to get the best results.
Here are some ways you can track the performance of your sales cycle and see if the efforts you’ve made are actually bringing in any results.
Your Sales Quota
A sales quota helps define milestones that need to be achieved by each sales rep in a certain period of time. Sales quotas usually make bigger targets more attainable by providing the reps with a clear direction. They clearly know what needs to be done and how they will be evaluated, so they put all of their efforts into meeting their quotas.
You can set sales quotas by using either a top-down approach or a bottom-up approach. The former involves setting quotas keeping the businesses goals in mind, and the latter is based on how well the sales and marketing team did in the last period.
Each approach has its pros and cons, but the idea here is to make the sales goals measurable and achievable so that the sales operations can be planned around them and the sales cycle is more effective and realistic.
Specify Sales Cycle Length
The length of your sales cycle refers to the total time taken from the initial prospecting stage, up until the final sales contract is signed. The last stage, driving referrals, is usually an ongoing process, so we normally don’t take that into account.
A well-defined sales cycle creates transparency. Part of being well-defined means having a realistic timeframe and deadlines. Besides, having a defined length can help develop sales projections. You can easily forecast how much revenue you will generate in a certain period.
The easiest ways to calculate your average sales cycle length is through a reliable CRM like Salesforce, Oracle, or Zoho. These CRMs analyze your sales pipeline, automate all calculations, and make sales cycle management easier.
If you’re on a tighter budget or prefer to measure your cycle’s performance manually, you can always default to the classic spreadsheet approach. You’ll need to track the average time interval to move a prospect from one stage to another. Additionally, make sure you keep variables like the product’s price, payment terms, market maturity, number of stakeholders, and the company profile under consideration when performing the calculations.
Use Relevant Sales KPIs
Sales KPIs are metrics that allow you to measure and optimize the performance of your sales teams and reward them for their honest efforts.
Selecting the correct KPIs is crucial for every business since they help you control all stages of the sales cycle and optimize your procedures. With adequate KPIs in place, you can identify bottlenecks in your sales pipeline and clear them out to drive maximum revenues.
Some of the most popular things to focus on include metrics like growth percentages, sales targets, customer lifetime value, churn rates, conversion rates, customer acquisition costs, and so forth.
Trust your data
Make sure that you document data from all customer touch points and run some sort of analysis to understand how things actually are. If you are still not tracking hard metrics in your sales cycle, you are missing out on more than you can imagine. Data doesn’t lie as long as the measurements are configured properly. Good intel gives you an accurate representation of the situation. Combine this what your team members tell you and you’ll have lots to work with.
As you hopefully understand now, the sales cycle is helpful in structuring your sales process and increasing the success rate of your pitches. Here are a few questions that will clarify any remaining confusion you may have about the sales cycle and give you a crystal clear overview.
What’s the point of following a sales cycle?
Simply put, a Sales Cycle is the series of steps a business follows to close a sale. This cycle works the same for both products and services and defines a clear method for nurturing prospects into customers. Having a sales cycle in place allows you to test different methodologies at different stages and find out what works best for you.
How do you improve your sales cycle?
You can take a systematic approach towards identifying flaws at each stage of the cycle and then implementing fixes for better results. Some simple approaches to improve your sales cycle include scoring your leads, nurturing leads that aren’t ready, using CRM software to implement automation, tracking performance, and making your pitches clear and concise.
How is a sales cycle different from a sales funnel?
A sales funnel gives you an overall view of all sales activities. This may include multiple sales targets and cycles. The sales cycle zooms in a bit and defines the series of steps that need to be taken to sell to a single customer.
What role does the sales quota play in your sales cycle?
Sales quotas can be of great help in sales forecasting and monitoring rep activity. You can set clear expectations and motivate the salesforce to hit a given level of activity. Setting quotas at every individual stage of the cycle ensures that the cycle performs at an optimal level and gives the best ROI.
What are the common KPIs to measure a sales cycle?
You can measure the performance of a sales cycle with adequate KPIs in place. A modern sales cycle can be analyzed on KPIs such as monthly sales growth, average profit margin, sales targets, churn rate, conversion rate, and average purchase value.
Improving on slow sales cycles
Sales are a delicate function. Success comes down to how well you understand your customers and how relatable your offering is for their specific pain points. So don’t press your sales reps if they are unable to reach targets immediately. Try understanding the weak points in your sales cycle and fix them bit by bit. Slowly and surely, you will get there.
If you liked the article, make sure you leave a comment below, letting us know what you think of it. Best of luck with your sales!