Many companies are less than forthright when discussing the length and makeup of their sales cycle with current and prospective salespeople.
They fear that if their salespeople clearly understand just how long it will take before the first commission check hits their bank account – and how many hurdles will have to be jumped along the way – the team will beat a hasty exit while the getting is good.
This approach is a mistake. Explain the Sales Cycle.
As I described in my article on Recruiting Top Producing Salespeople, and will explain in detail in my upcoming article on Corporate Transparency, my belief is that in all aspects of running a sales team, honesty is the best policy.
Better to repel people who can’t deal with a long sales cycle right at the start than have them hanging around, becoming increasingly disillusioned and poisoning the rest of the group with their frustration. And better to arm those who can accept the slow cycle with all the information they need to engage with and accelerate the process.
Salespeople can – and are incentivized to – speed up the sales cycle. Give them a clear picture of the whole process and help them to help you speed it up.
In this article I’ll cover:
- The Definition of The Sales Cycle
- Setting and Managing Realistic Expectations
- The Impact of the Sales Cycle on Your Comp Plan
- Balancing the Pipeline and the Sales Cycle
- How to Shorten The Sales Cycle
What Is The Sales Cycle?
My definition of The Sales Cycle is the period from first contact with the prospect to the moment the sales rep sees the commission show up in his bank account. Many people feel that the sales cycle ends when the deal is closed. Those people are probably not salespeople.
Days and weeks can come and go between the time the deal is closed, the rescission period expires, the paperwork is blessed by lawyers or others, financing is arranged, goods and/or services are delivered and accepted, payment is received, the check clears the bank, the commission report is generated, the next pay cycle comes around, the salesperson receives and deposits the check and it appears in his account.
Business owners and sales managers who ignore these final steps do so at their peril. You can be sure the salespeople are paying close attention to them. One of the best truisms I ever heard about salespeople is that they are coin operated; show them the coin and they’ll operate. A closed deal ain’t coin, money in the bank is.
Steps in the Sales Cycle
The Sales Cycle occurs in phases, beginning with marketing efforts that attract the prospect to your offering. Whether that includes television advertising or door-to-door canvassing, someone has to persuade a prospective buyer to take a closer look at your product. As soon as someone raises their hand and says “I’m interested,” the Sales Cycle has begun.
Marketing should continue until the prospect is qualified and their contact information is collected. Once we know who they are, what they need and how to get in touch with them, we have a lead (not just a name) which is handed off to the Sales Department. This qualification and handoff process should occur as quickly as possibly and can often be automated.
This next phase can take many paths depending upon your product, your industry, your target market and your sales process, but it will somehow begin with a conversation between the prospect and the salesperson. The salesperson asks discovery questions and the prospect explains how we can help them.
In a business-to-business sales cycle multiple conversations may be required. All decision-makers need to be identified along with their needs and perspectives. An initial presentation may lead to multiple additional presentations before an actual proposal is presented. This process can be accelerated by identifying all the players ahead of time and presenting to them all at once, online if necessary to assure 100% participation.
For in-home sales teams, one-call closing has been the rule for years. But recently, due to increasing customer sophistication, bad past industry practices and the downturn in the economy, two or more calls may be required in order to get to the point where a deal can be closed. While this slows the sales cycle by a couple of days it can lead to much higher closing percentages and drastically reduced rescission numbers.
In either B2B or B2C situations, once a proposal has been proffered, closing time begins. Don’t wait, begin closing.
Eventually we win or lose the deal. If the deal doesn’t close, a good company will continue to drip on the prospect until the deal has clearly been lost to a competitor. Unfortunately, effective and systematic Follow-Up is a rare bird indeed as will be explained in my upcoming article on the subject.
If the deal is truly lost we move on. If it is won, we then begin the final phase of the sales cycle which, as was described above, involves delivering the goods and getting paid.
Setting and Managing Realistic Sales Cycle Expectations
Generally speaking, B2C sales cycles are shorter and B2B sales cycles are longer and professional salespeople with experience in either arena understand which is which. Nonetheless, it is a mistake for management to gloss over how long it may actually take to get paid when interviewing prospective salespeople.
I once worked for a home improvement company which followed a standard industry approach to paying commissions. The commission rate was 10%, with half being paid up front in the first pay cycle after the rescission period. Depending on the day you close the deal this could add as much as two weeks to your wait.
The second half of your commission would come after the job was completed and the customer paid in full, supposedly in an average of 4-6 weeks. The problem with this approach was that, if the sales team kicked butt and brought in a lot of projects, the production department would get backed up, creating a backlog of up to 3 months. Not a happy scenario for the salespeople who were in effect being punished for being so productive. The solution? Keep selling more deals!
Another company I worked with in a B2B environment didn’t speak to the sales cycle at all. Little wonder. The prospect and lead generation process (which was placed on the salespeople because no Marketing Department or efforts existed) was extremely lengthy. Qualified prospects were very hard to find and the number of competitors in the marketplace was daunting.
Even when you did find someone who was interested and qualified, so many decision-makers had a stake in the process and so many competitive offers existed that many weeks or months would go by without any movement. If you didn’t stay on top of those people you would lose out to others who would.
And if you were lucky enough to find a big prospect, the amount of discounting required in order to land a big deal would cut out over half of your commission. The net effect was that your best possible approach was to try to land scores of small accounts, all of which took as long to hook as bigger ones. Clearly this was a bad situation and I have no one but myself to blame for becoming involved.
The point is that owners should not only be honest with their salespeople about the length of the sales cycle, but with themselves as well. Don’t kid yourself; this stuff takes time! And you may well lose great salespeople whom you’ve invested training and support into because they just can’t wait any longer to get paid. Recognize the problem and take proactive steps to minimize it. Your cash-flow will thank you as well.
Impact of the Sales Cycle on the Compensation Plan
An obvious remedy to the impact a long sales cycle can have on salesperson turnover is to offer a base salary. This is more common in B2B environments where the cycles are longer and more training, support and ramp-up time is generally offered. These positions are often W-2 employee/employer relationships which offer benefits including group medical insurance participation, holidays and 401-K accounts.
A lot of the job listings I see for in-home sales offer “unlimited upside potential” with no base pay or benefits in a 1099 independent contractor arrangement. I’m fine with that and have worked successfully in that environment, but the start-up phase can be painful and frustrating.
Many of these B2C companies would never consider offering a base salary. At best they offer a recoverable draw where monies paid upfront are repaid to the company out of future commissions. My response is “Pay me now or pay me later.” Whatever you save by withholding base pay may well be eclipsed by the money you lose training and supporting people who end up leaving you before they generate a single sale. Turnover is not only expensive but also detrimental to growth.
Balancing the Pipeline and the Sales Cycle
The longer the sales cycle, the more deals you need to have at every stage of your pipeline. This way you ensure that – once the pipeline fills – you’ll have a steady flow of money coming out the other end. Again, this is something that must be made clear up front by the company during the recruiting process.
In B2B positions your pipeline or funnel may have myriad stages, each of which should be as full as possible and moving forward as quickly as possible. A good CRM (which will be described in an upcoming article) will help you and your manager stay on top of this process and pinpoint areas of weakness.
In a B2C job you keep your pipeline full by running every lead you get – no matter how bad you think it is – and doing your best to listen, solve, close and follow-up. Sales truly is a numbers game and the more people you see the more you’ll sell. Never prejudge a prospect’s willingness to buy or ability to pay. Sell them all the same and keep your pipeline full.
How Salespeople Can Shorten the Cycle
The most important first step in shortening the Sales Cycle is to fully understand it. How long is it? How many steps or phases does it contain? What are those steps and which ones are the most common pinch points? Learn the Cycle like the back of your hand and own it the same way.
Focus your attention on the pinch points and brainstorm with your manager and peers on how to loosen them. Make the extra phone call, call a day sooner or hours earlier, contact prospects through multiple channels, develop best practices based on your team’s experience, find a mentor who sees all and knows all.
Use your CRM for everything it’s worth. Learn everything you can about its functionality and features. Read your reports. Check your funnel twice a day. Look for weaknesses or air bubbles that may cause an income disruption in upcoming weeks or months. Focus your attention on eliminating those bubbles without losing sight of the big picture.
The most important thing you can do to accelerate the sales cycle is to improve your closing skills. The sooner you get someone to make a decision in your favor the sooner you’ll get paid. Ask the right questions initially, create a sound plan for solving your prospect’s problems, explain your plan clearly and ask for the sale.
Be prepared to rebut every objection, provide testimonials, case studies or references. Require your prospects to agree to a decision by a date certain. Be willing to take “no” over “I need more time to think about it.” Present yourself with confidence from a position that infers that the customer needs you more than they need them.
Your time is valuable and your solution is clear. If they just want to play around they’re going to have to find another playmate. You have customers out there that need you.
The bottom line is this…
Business Owners and Sales Managers: Confront the Sales Cycle Head-On. Explain It. Own it. Accelerate It.
Salespeople: Embrace the Sales Cycle. Learn It. Work It. Accelerate It.
If all of this sounds like a great idea but you have no idea when you’d find the time to implement it, give me a call.
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