What is a Sales Cycle?

Definition

A sales cycle is the series of steps, or the process, that a company undertakes from the initial contact with a prospect to the final closing of a deal. It represents the time duration it takes for a potential customer to move through the entire sales pipeline. The length of a sales cycle can vary dramatically depending on the product’s complexity, its price, the industry, and the number of decision-makers involved.

Examples

• Short Sales Cycle (1-7 days): A small business owner buys a monthly subscription to an online invoicing software. The process involves signing up for a free trial, testing the features, and upgrading online without ever speaking to a salesperson.
• Medium Sales Cycle (1-3 months): A mid-sized company purchases a new marketing automation platform. This cycle includes an initial demo with an SDR, several follow-up meetings with an AE, a proposal, and negotiation before the contract is signed.
• Long Sales Cycle (6-18+ months): A large enterprise buys a complex ERP system. This process involves multiple departments (IT, finance, legal), extensive security reviews, a formal RFP process, and board-level approval, making the cycle very long.

Advantages/Benefits of Understanding It

• Improved Forecasting: Knowing your average sales cycle length is crucial for accurately predicting when current opportunities are likely to turn into revenue.
• Process Optimization: By analyzing the time spent at each stage, you can identify and fix bottlenecks that are slowing down your sales process.
• Performance Benchmarking: It allows you to measure and compare the efficiency of different sales reps, teams, or marketing channels.
• Better Strategic Planning: Understanding how long it takes to acquire a customer informs your financial planning, resource allocation, and overall go-to-market strategy.

Related terms

• Sales Pipeline
• Sales Velocity
• Time to Close
• Customer Journey
• Lead Nurturing
• CRM (Customer Relationship Management)