When it comes to B2B SaaS sales cycles, it’s never easy to know if you’re doing good. How many days does it take to close a deal? What factors and characteristics affect this number?
The first thing to understand is that SaaS sales cycle can vary dramatically, depending on a few factors.
What factors affect B2B SaaS sales cycles?
Sales cycle will vary dramatically depending on what size of companies you’re targeting. And the reason is simple: enterprises have complex structures, and you’ll have to go through a long compliance process that can take weeks or months. It also tends to take longer because you have to sell the solution to several people, not just your end user/department. Every time a new stakeholder is involved in the buying process, you have to re-sell the product.
Let’s say you’re selling a marketing automation tool to a Fortune 500 company. It’s not enough to have the marketing director bought in, you’ll probably have to go through IT to prove you’re infrastructure is reliable and their data is safe; then procurement where they will compare your proposal with at least two others; then finance to have you registered as a vendor, align payment conditions and methods. It ain’t easy.
That might sound obvious, but the more expensive your product is, the longer it will take you to sell it. Let’s say you are selling a simple self-service tool that costs $5 a month; There’s a chance your target user will enter her credit card info and buy your product without thinking too much. It just not worth the time to overanalyze something that costs so little, you simply try it.
Now if you’re selling a solution that will cost the company more than a $100,000 per year, it will certainly take longer. People don’t want to make such commitment/investment unless they’re sure you’re exactly what they need. Commonly it’s even necessary the investment is planned a year ahead, usually around Q3 when companies are planning budget forecast for the next year.
Same as price, if you ask customers for longer payment terms, such as annual contracts, it will certainly take longer for you to close the deal. Look at HubSpot for instance, they only sell their product if you pay for a full year upfront; There are a lot of benefits of such decision, but it’s definitely an adoption barrier and it certainly extends their sales cycle.
If you’re selling a complete solution that will impact various departments and functions within a company, you’ll take longer to close a deal. Imagine you’re selling an ERP that will impact the way the whole organization works, versus selling an email marketing tool that will be using a single department. It’s pretty different, right?
If you’re a point solution, you’ll tend to have fewer people involved in the process and therefore will close the deal faster. Fewer people involved equals less analysis, fewer barriers, less time.
If you’re not selling to an existing market with known and defined functionality and competitors, you’ll also tend longer to sell. That’s because before you’ll have to prove yourself useful. If a company is adopting an existing/known solution such as a payment gateway, they’ll likely to compare your features and price with competitors and make a decision.
If you’re selling something completely new, you’ll have to educate the market first, make the customer aware of the problem, present them the solution to that problem, and then show them why your solutions are the best.
Ok, all these factors make sense but we want numbers, right? Here’s are some overgeneralized data to give you a rough sense, captures from a response Jason Lemkin gave on a Quora post about this topic.
Keep in mind that these numbers can vary dramatically, depending on the factors above.
These are sales cycles from High Probability Opportunities. i.e., a prospective customer has said there is a high likelihood she will buy, says it is budgeted (if deal size is big enough to matter), and sales rep believes this is true.
It may take one call to get you a High Probability Opportunity. It may take you 2 years. So I’m not counting that time, though you may be.
Once you are there:
- Deals ~$2,000 in ACV should close on average within 14 days.
- Deals ~$5,000 in ACV should close on average within 30 days.
- Deals ~$25,000 in ACV should close on average within 90 days.
- Deals ~$100,000 in ACV should close on average within 90-180 days depending on # of stakeholders.
- Deals $100,000+ in ACV will take on average 3-6 months to close. Of course, some faster, some shorter.