Sales Cycle

Sales Cycle

Docs / Sales Cycle

The Sales Cycle is the total time taken from when a deal is first qualified to when it is either won or lost. Every business has a sales cycle, but no two business’ sales cycles are exactly alike. Understanding and optimizing the sales cycle is an important aspect of improving sales & revenue.

Winning deals takes time, and that time greatly impacts when you earn revenue. Understanding your unique sales cycle is critical to optimizing the business.

Deal Aging

The number of days since a deal has been qualified we call the “age of the deal”, “age”, or “aging”. The age of a deal is a one of the most important factors in calculating its probability to win at any given time.

Sales Cycle Distribution

When a business will typically win their deals is different from business to business, and we call this the Sales Cycle Distribution. There are 4 primary sales cycle distributions that most companies will have:

  • Early: Wins will typically happen early in the sales cycle
  • Middle: Wins will typically happen towards the middle of the sales cycle
  • Late: Wins will typically happen towards the end of the sales cycle
  • Multi-modal: Wins will congregate at multiple ‘peaks’ within the sales cycle
The 4 major types of sales cycle distributions, curtesy of
The 4 major types of sales cycle distributions, curtesy of salesinsights.io

Aging Schedule

The Aging Schedule is how you slice/bucket the sales cycle distribution. These buckets allow you to determine the performance of deals by their age and calculate their probabilities.

For example, here is an illustration of a company with a monthly aging schedule. It contains the number of deals won at that month old, and the number of deals still open at the given month old.

Sales Cycle Distribution by month, curtesy of
Sales Cycle Distribution by month, curtesy of salesinsights.io

Aging Schedule Types

There are a few common types of aging schedules you will see in most businesses.

Monthly

The deals age on a monthly basis. Companies that have sales cycles longer than 2 months will most often use this aging schedule.

Daily

The deals age on a daily basis. Companies that have very quick sales measured in days will use this aging schedule.

First Week Daily

For the first week, deals age on a daily basis. Then weeks 2-4 they age weekly, then after that they age monthly. Companies that have quick sales for most of their wins, but that can also stretch out past a month will use this aging schedule.

Hourly

Companies who all their sales complete within 24 hours may use an hourly aging schedule to analyze their deals.

Aging Cohort

As deals move through their sales cycle and aging schedule, they are always in one Aging Cohort or another. For example, in a monthly aging schedule, when the deal is less than one month old, we say it is in the first month cohort. When it is 6 months old, it is in the 6th month cohort. You can look at the probabilities of winning a deal in any particular cohort, the expected value, and other interesting metrics.

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