The Sales Cycle is Non-Cyclical

Quick Summary: Sales cycles vary considerably based on the company’s stage and market acceptance.

Abstract:

It is easy to assume that sales cycles will be constant and predictable.  Unfortunately, especially for new companies or products, initial sales cycles can be very deceiving and lead to projections that can have severe consequences.  Carefully examining how you received the order and if future orders will follow the same pattern is important to planning growth and especially operating cash requirements.

Virtually every company longs for a consistent, predictable sales generation machine.  In it, prospects serve as the input source, the sales machine crank is turned, and standard processes are followed.  After an easily predicted time, a customer pops out of the well-oiled sales machine.  To be sure, these situations do exist.  Previous articles have described the popcorn making machine at a movie theater.  In it, kernels are added, heat is applied, and after some fairly fixed time, popped corn emerges.  There are, of course, variations for each kernel but with enough kernels at enough different stages, a constant flow emerges. Many consumer products with a proven track record and consistent demand also follow the same model.  Unfortunately, for startups and companies introducing new products or, even more challenging, when addressing an issue that prospects are unaware of, sales events can be highly unpredictable.

It is easy to fall into the trap of grossly underestimating the time it takes from the beginning of a sales cycle until its completion.  Further, significantly different sales cycles can evolve over time.  Thinking can be clouded by considering the “overnight” success of other companies.  Google and the cellular industry are examples.  Google is over twenty-two years old, and the original concept for cellular systems was defined in 1947!  For some companies, initial short sales cycles can occur due to the offerings attraction to first movers, who may be a small group that is not indicative of the future, larger potential market that may occur.  Many of them are visionaries. However, by definition, not all participants in a market can be visionaries.  In other cases, the offering may partially address a significant pent-up demand by a certain sector or may be a fad purchase.

In those cases, the euphoria of those initial sales may mask the true sales cycle of the larger market.  Afraid of missing the wave, companies often project even higher sales based on the fast initial slope of their sales curves and over-invest in inventory, facilities, or people.  The resulting increase in cash demands can be fatal to a company as the demand subsides to a more reasonable level.  Other sales cycle traps can occur as a company expands into new markets or regions in which they have not previously established a presence.  For startup companies, initial orders may be driven by relying on the CEO’s or sales reps past relationships and Rolodexes or even friends and families.  

There is no question that early victories and short sales cycles should be celebrated.  However, it is prudent to step back and ask a few basic questions before predicting future results based on these past events.

  1. Was this sale the result of previously established relationships, or did the merits of our offering appeal to individuals and companies that are new to us?
  2. Was this sale indicative of the larger market, or does it represent the actions of those who enjoy first-mover status?
  3. Was the sale indicative of a small market that has a unique, unfulfilled demand that may not be present in larger market segments?
  4. Did we provide unique products, services, or pricing that will not scale as our sales activities increase?
  5. Do we really believe that this order is indicative of future orders and the process and its timing will be the same?
  6. How many sales calls and meetings did you really have in closing the first few customers?  Is this indicative of the future sales process?  Can you afford it?

The goal of these questions is obviously not to depress you.  Instead, it is intended to help you develop a realistic understanding of the possibility of non-cyclical, consistent sales cycles which, if not understood, will be far more depressing and frustrating if they occur in the future.  If not considered, that initial euphoric state will be replaced with frustration that may last a very long time.

 

Article Number : 5.010210   

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