Sales Cycles and setting it up in Salesforce

Let's talk about sales cycle analysis today. You've all heard about deal velocity. Put simply, it's the measure of how quickly the sales team can move a deal from opportunity to close. I use velocity because it gives you both speed and direction.

Today I will walk through a technical solution for you. If you're a paid member I'll have a video which you can watch to see how I built it in Salesforce.

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As for any DIY solution we're going to need a couple of tools at your disposal. Can someone please produce the Food Network's equivalent of Chopped for RevOps. That would be amazing.

For reals we're going to need the following:

• Custom fields on the opportunity object

• Custom object which we will name Opportunity Stage Change

• Two flows

• Roll-up helper

And that's it.

This will work on a go-foreward basis but you'll want to upload your history so you have reporting.

Source: Revenue.fyi

But first the why

In previous articles we covered pipeline management and forecasting. Knowing your deal velocity will allow you to have an educated guess on how much of the existing pipeline will win and by when.

The classic formula for deal velocity is:

(# of opportunities * average deal size * win rate) / ( sales cycle)

We're going to focus on the denominator: sales cycle.

Imagine your sales cycle distribution looks like this.

Source: SuperCycle CRM

If you simply take the average you might be misled. This may be because of a variety of reasons:

• Segmentation

• Poor process hygiene

• Different motions (new vs. expansion, inbound vs outbound)

• Boomerang or win back deals

• Regional differences

Let's dive in.

Segmentation

Sales cycle lengths can vary significantly depending on customer segmentation. Segments might include different industries, company sizes, or levels of technological maturity, each with unique needs and decision-making speeds. For example, larger enterprises often have longer sales cycles due to complex decision-making structures and procurement processes, compared to smaller businesses that may make quicker decisions.

Poor Process Hygiene

Poor process hygiene refers to inconsistencies and inefficiencies in the sales process, such as unclear roles, lack of follow-up, or inadequate use of CRM systems. These inefficiencies can lead to delays in moving prospects through the sales funnel, as critical steps may be missed or poorly executed, prolonging the overall cycle.

Different Motions (New vs. Expansion, Inbound vs. Outbound)

New vs. Expansion: Selling to new customers usually takes longer than selling to existing ones. New customers require education about the product and must build trust with the brand, while existing customers already understand the product's value and have established relationships with the seller.

Inbound vs. Outbound: Inbound leads, who come to the company through marketing efforts or direct interest, typically have shorter cycles because they have already shown interest in the product. In contrast, outbound sales involve reaching out to potential customers who may not be aware of or initially interested in the product, resulting in a longer persuasion and education phase.

Boomerang or Win Back Deals

Win-back deals involve re-engaging former prospects. Win back deals are with former customers. These cycles might be shorter as these customers are already familiar with the product and the company. However, the length could also depend on the reasons they left and the efforts required to address their previous concerns or changes in their circumstances.

Regional Differences

Sales cycles can vary greatly across different regions due to cultural differences, economic conditions, regulatory environments, and market maturity. For instance, businesses in North America might close deals faster than in some parts of Europe or Asia due to different business practices and negotiation norms.

Each of these factors introduces specific variables that can either lengthen or shorten the sales cycle, affecting how sales strategies should be tailored for different situations. Understanding and adapting to these differences is key to optimizing sales effectiveness across different contexts.

Having the data in hand is a start

The goal isn't to have the data. It's what you do with it that matters more. Shrinking the sales cycle increases the amount of time a business has in-quarter or in-year to generate pipeline that will count for the year. Otherwise, existing pipeline will have to close with a higher win rate and/or higher deal size. Easier said than done.

BUT the sales cycle is definitely something you could work with. According to the chart above 51% of opportunities take between 4 months to 12 months to close. If your solution is under six figures then I would bias towards the lower end of that spectrum. Pushing close or over six figures you’re looking at 9 to 12 month cycles. Where can you shave time? Even just shaving a few weeks gives your team a shot at creating more meaningful pipeline that will count for the year.

An example

I tell my sales team to have six booked meetings on their calendar each week. Why? Well if one of those six meetings turns into an opportunity that represents one a week. Assume my average sales price is $175K then the rep can reasonably generate $700K in pipeline per month. Over the course of a year that's $8.4M per year. Assuming a 15% win rate then that pipeline could yield $1.26M in achievement for the pipeline generated that year.

Let's assume that the sales rep is new to the company. Assuming a 4 month sales cycle you push 1/3 of that achievement into the following year. Also, the first two months they are in training mode. So that's another 2/12 spent ramping. Taken together you're looking at 1/2 of the $1.26M removed from the fully allocated achievement from six meetings per week. $630K for the first year off a presumably ramped equivalent of 9 months (assume non-recoverable draw for 3 months for brand new reps) quota sounds about right for the normal distribution of reps.

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