What is a Sales Cycle?
By definition, a sales cycle is a set of stages needed to make a sale. A company and its sales reps are perpetually engaged with different prospects at different stages of the cycle. Sales cycles, and the anticipated length of time needed to complete them, vary significantly depending on the product or service being sold. Real estate or a piece of industrial equipment, for example, are likely to have a long sales cycle. Spell-check software or a computer mouse will have a short one by comparison.
Sales cycle stages
While the stages of a sales cycle will vary from company to company (and product to product), they typically share the following elements:
- Prospecting: Finding prospects and making that first contact
- Qualification: Determining whether the prospect is a potential good fit for the product or service by identifying their needs.
- Educating: Presenting information about the product or service as it applies to your prospects’ needs, through meetings, presentations and demos, or sales and marketing collateral.
- Evaluation: Moving prospects toward a decision by addressing questions, concerns, and objections.
- Closing: Negotiating and signing a completed deal.
- Retention and Referrals: The process of retaining existing customers, ensuring they are satisfied, and ideally referring new prospects to you.
What does it mean to shorten the sales cycle?
The amount of time prospects spend moving through the sales cycle can have a big impact on profitability. In an effort to manage the amount of effort, money, and resources invested at every stage, companies and their sales agents are inclined to “shorten the sales cycle.” Shortening the sales cycle is a combination of moving prospects through the cycle faster, as well as getting prospects who are unqualified or unlikely to buy to drop out of the cycle faster, so precious resources aren’t wasted on them.