What it means
The sales cycle runs from the first meaningful contact with a prospect, often when a lead becomes a qualified opportunity, to the signing of the deal. For a simple online subscription it might be a few days.
For an enterprise software system or a large piece of machinery it can stretch to many months. The measure matters for forecasting.
If the average cycle is 60 days, an opportunity that enters the pipeline today is unlikely to bring in revenue until about two months from now. A finance team uses this to time its cash flow projections and to judge whether the pipeline is large enough to hit next quarter's target.
It also feeds into sales cost and hiring decisions. A longer cycle ties up salespeople on each deal and delays the return on marketing spend, so the cost of winning a customer rises.
If the cycle lengthens, a business may need more working capital and more sales staff to deliver the same number of deals. Averages need careful reading.
The cycle length typically varies by deal size, customer segment and channel, and a handful of very slow deals can distort the mean. Many teams look at the median as well, and track only won deals to avoid mixing in stalled opportunities that never closed.
To shorten the cycle, companies simplify pricing, prepare standard contracts, involve decision-makers earlier, offer trials or pilots and remove approval bottlenecks. Faster is not always better, since rushing buyers into a deal can raise cancellations, but unnecessary delay usually costs money.
Seasonality can also affect the cycle. Many buyers delay decisions near holidays and fiscal year ends, and some budgets are released only in particular months.
Sales leaders who understand these patterns can start deals earlier and avoid being surprised by slipping close dates.
In practice
Real-world examples
Example 1
A cloud software company averages 45 days from demo to signature for small customers and 150 days for large ones. Its sales director builds separate forecasts for the two groups, because blending them would hide the real timing.
Example 2
A commercial printing firm finds that quotes take 12 days to convert. After it introduces an online quote tool that gives instant pricing, the cycle falls to 5 days and the sales team handles more quotes.
Example 3
A construction equipment supplier knows its sales cycle is about 120 days. Its finance team therefore plans for cash from new orders to arrive in the quarter after the pipeline builds, and arranges working capital accordingly. The supplier also keeps a record of the quarters when customers' budgets are normally released.
Think of it
Sales cycle length is how long it typically takes to turn a prospect into a paying customer.
Formula
Calculation
Average sales cycle length = Total days taken to close all won deals / Number of won deals
Suppose a business closed five deals last quarter, which took 30, 45, 60, 90 and 75 days from first qualified contact to signature.
Total days = 30 + 45 + 60 + 90 + 75 = 300. Average sales cycle length = 300 / 5 = 60 days.
If the company wants to close $600,000 of new business in the next quarter, it should have the matching pipeline already in progress roughly 60 days beforehand.Case study
Seen in the real world
Northwind Analytics is an illustrative, fictional business selling reporting software to hospitals. Its average sales cycle was 90 days, and the sales team of five closed 20 deals a quarter.
A new compliance requirement added a security review to each deal, and the cycle stretched to 130 days. Closed deals in a quarter dropped from 20 to 14, since the same team was carrying each opportunity for longer.
The company responded by preparing a standard security pack that buyers could review at the start of the process. The cycle came back to 100 days, and in this illustrative case the finance director saved the cost of hiring two extra salespeople. The finance director also asked the sales team to log the date each opportunity became qualified, so the cycle could be tracked consistently from then on.
Watch out
Common mistakes
- Including lost or stalled deals in the average, which mixes completed and incomplete sales and makes the cycle look shorter or longer than it is.
- Using a single company-wide average, when deal size and customer type can make the cycle vary enormously.
- Starting the clock at different points for different deals, which makes the numbers incomparable.
Questions
People also ask
When does the sales cycle start?
Most companies start it when a lead becomes a qualified opportunity, but whatever the definition, it should be applied consistently.
How is the sales cycle used in forecasting?
It tells you how long before today's pipeline converts to revenue, so it sets the timing of expected cash.
Can a long sales cycle be good?
It can be fine if deals are large and win rates are high, but it raises sales cost and ties up working capital.
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