What is the Average Sales Cycle Length?
Average sales cycle length is the average amount of time it takes for a lead to become a paying subscriber. It is measured in days and provides clarity on how quickly your sales efforts translate into revenue.
In SaaS, a shorter sales cycle is always desirable. It means you’re spending less time and fewer resources to convert a lead into a paying customer.
Calculation
Calculating average sales cycle length involves determining the number of days it takes for leads to convert into subscribers, and then averaging this over a defined period. Formula:
- Identify all leads who became paying customers within a specific time frame.
- Measure the number of days between the first interaction date and the subscription date.
- Average the total number of days across all these customers.
Here is an example:
- During May, you onboard 10 new paying subscribers.
- 5 subscribers took 10 days to convert, while the other 5 took 20 days.
- Total sales cycle days = (5x10) + (5x20) = 150 days.
- The average sales cycle is = 150 days ÷ 10 subscribers = 15 days.
Why is tracking your sales cycle important?
The average sales cycle length measures how efficient and effective your sales funnel is. A shorter cycle indicates a streamlined process that converts leads efficiently, minimizing lost opportunities. Conversely, a longer cycle may signal bottlenecks or inefficiencies that need to be addressed.
Understanding your sales cycle benefits your business in several crucial ways:
Improved sales forecasting
Knowing how long it typically takes to close deals helps you predict revenue more accurately. This ensures that your team is better equipped to meet pipeline targets and hit quarterly goals.
Resource optimization
By identifying the time spent nurturing leads, sales managers can allocate resources more effectively. For instance, leads or markets with shorter cycles may be prioritized to maximize revenue growth.
Benchmarking performance
Sales cycle length allows you to track your sales and marketing team’s performance over time and benchmark against industry averages. For SaaS businesses, minimizing friction in the buying process is an ongoing priority.
Product-market fit indicator
Short sales cycle lengths can be an early indicator of product-market fit. If your sales cycle is short, it can indicate limited friction, meaning those customers genuinely want to buy your product. This insight can help you identify how well your solution addresses your target audience's needs and further refine your product or service to amplify its appeal.
Spotting bottlenecks
If the average cycle extends, it could indicate challenges such as unclear value propositions, pricing objections, or unqualified leads entering the funnel. Addressing these bottlenecks helps streamline the process further.
Sara Archer, VP of Sales, ChartMogul A few years ago at ChartMogul, we set a goal to shorten the sales cycle for our largest customers—those paying over $1,000 in MRR. We took a close look at how we were selling to larger businesses and made several key improvements. We upgraded our contracts to look more professional and enterprise-ready, refined our discovery process to include questions about procurement and security involvement, and introduced more flexible billing options. We also started offering pilot programs to de-risk the commitment for our prospects. As a result, we decreased the average sales cycle length by 20%.
Segmentation for deeper insights
Segmenting your sales cycle length provides deeper insights into where variations occur and why. Here are common ways to segment this metric:
Monthly vs. annual plans
Analyze how sales cycle length differs between customers opting for monthly subscriptions compared to those selecting annual plans. Typically, annual deals may take longer due to their higher investment but offer greater revenue stability.
Annual plans are key to achieving 100% Net Revenue Retention (NRR). Learn more in the SaaS Billing Report.
Deal size/revenue
Larger deals have longer sales cycles. This is often because there are many stakeholders involved in larger deals, each with their own priorities and concerns. More people means added complexity, as aligning multiple decision-makers can extend negotiation times and require additional approvals. It’s crucial to identify key stakeholders early in the process and address their specific needs to ensure smoother progress and reduce delays in closing deals.
Managing longer sales cycles requires focusing on key skills like multithreading and understanding procurement. Multithreading means working with multiple stakeholders at once, so you're not relying on just one person in the account. This reduces risks and ensures everyone involved is on the same page. Understanding procurement means knowing how an organization processes approvals, who makes decisions, and what challenges might come up. By improving these skills, sales professionals can build better relationships, simplify negotiations, and close bigger deals more effectively.
Segmenting by deal size matters because it helps sales teams adjust their strategies and resources to meet the specific needs of each account more effectively.
Lead source
Leads from inbound channels (e.g., website requests) may convert more quickly than outbound leads (e.g., cold outreach). Marketing teams play a crucial role in generating and nurturing leads from various sources, impacting the sales cycle. Understanding these nuances helps fine-tune marketing strategies.
Geographic segments
Cultural, economic, and market differences can impact how potential customers make decisions. Businesses operating in diverse regions benefit from exploring these variations.
Freemium users
For SaaS businesses offering freemium plans, the sales cycle for unpaid users upgrading to paid plans will naturally differ from those who sign up directly for paid services.
Factors that influence your sales cycle
Several internal and external factors determine how quickly a potential lead moves through the sales funnel. Understanding the needs and behaviors of a potential customer is crucial in determining how quickly they move through the sales funnel. Here’s a breakdown:
1. Deal complexity
Highly customized solutions often require more time to develop and implement compared to ready-to-use products. This is because they are tailored to meet specific business needs, involving detailed planning, design, and often complex integrations with existing systems. Extensive implementations may also require more testing, adjustments, and collaboration with stakeholders to ensure the solution aligns perfectly with the intended goals.
2. Number of people involved
The length and complexity of your sales cycle can be significantly influenced by the number of individuals involved in the decision-making process. When multiple stakeholders are required to approve a purchase, the process often includes more meetings, discussions, and negotiations.
This is especially true for B2B transactions or high-value products where input from various departments is necessary. Aligning with all decision-makers and addressing their unique concerns can extend the sales timeline but also increases the likelihood of a successful deal when executed effectively.
3. Pricing
High-ticket items or SaaS solutions with ambiguous pricing structures often lead to longer cycles. Providing upfront pricing transparency can mitigate delays.
4. Trial periods
Trial periods can influence the sales cycle in different ways, depending on how they are structured and used. On one hand, an engaging and well-optimized trial experience can accelerate the decision-making process by quickly demonstrating the product's value to the prospect.
On the other hand, lengthy or unfocused trials may result in delays, especially if prospects are not actively guided through the process or take additional time evaluating the solution. Striking a balance with a clear trial framework and proactive engagement can help ensure trial periods drive conversions without unnecessarily extending the sales cycle.
5. Sales process friction
Confusing sales processes, missed follow-ups, and unclear next steps can slow things down and frustrate both sales teams and customers. Without a clear plan, it’s hard to prioritize leads, stay organized, or keep communication flowing—resulting in lost opportunities and wasted time.
CRM tools and automations can fix this by simplifying workflows and keeping everything on track. They help teams manage tasks, send follow-up reminders, and get a clear view of where each customer is in the process. The result? A smoother sales pipeline, better efficiency, and higher conversion rates.
6. Seasonality
Certain times of the year, such as holidays or budgeting cycles, can influence decision-making speed. Aligning outreach strategies with your audience's buying cycles is key.
Is there seasonality in SaaS?
Q1 is the most successful quarter for SaaS sales across the industry. Seasonality exists across all ARR ranges, no matter the billing model. Q1 is the strongest quarter across the board for customer acquisition, Q4 appears to be the slowest quarter.
When it comes to operating a thriving SaaS company, understanding every aspect of your sales process is critical. One key metric for sales managers and SaaS businesses to track is the average sales cycle length. This metric not only offers valuable insights into your team’s efficiency, but also guides your sales forecasting and strategy development.
Faster sales, greater success
Whether you’re aiming to improve sales forecasting or refine your lead-nurturing strategy, tracking and optimizing your average sales cycle length is a fundamental step. By understanding the underlying factors and segmenting this metric by key variables (like plan type or lead source), your SaaS business is better positioned to streamline sales operations and achieve higher velocity.