Sales cycle

Sales cycle is the number of days from the moment a deal appears to the moment it is paid. It shows how long money takes to arrive after an inquiry, and so how far ahead you have to fill the pipeline. With a short cycle the money comes back quickly. With a long one, today's plan depends on deals opened weeks ago.

The start date in your CRM is the deal creation date, or the date of the first inquiry if deals get created later. The end date is the payment date: the close date of a won deal, or a separate payment field if you have one. Subtract one from the other for each won deal and take the median for the period.

Count deals that ended in a sale.

A deal opened on October 3 and paid on October 24 has a cycle of 21 days.

Review the sales cycle monthly and look at the median as well as the average. One deal that dragged on for a year pulls the average up on its own. The head of sales splits it by channel and by deal size.

Two decisions depend on it: how early a quarter's plan has to show up in the pipeline, and when a deal counts as stuck. Example (invented numbers): with a median of 21 days, a deal that has not moved for six weeks needs a decision.

Sales cycle feeds pipeline coverage and the forecast: a deal that cannot close inside the period should not be counted toward it. And a longer cycle at the same win rate means you pay the CAC long before the revenue arrives.

• Counting from the creation date when sellers create deals days after the first contact. Use the first inquiry date, or make sellers create the deal at the first contact.
• Including open and lost deals. Count only deals that ended in a sale; the others have no end point to count to. Lost deals belong in win rate.
• Taking the date the deal moved to won when the payment came later. The real cycle is then longer than the CRM shows, so use the payment date.
• Averaging small and large deals together. A quick small sale and a long project tell different stories. Split them by deal size or by channel.

By Friday, the head of sales exports last quarter's won deals with two columns: creation date and payment date. Count the days for each deal, then take the median for the team and for each channel. Write the median at the top of the pipeline review page. Use it to set the limit after which a deal without movement goes on the review agenda. Send the number to the owner, so the cash plan runs on the same days.

Which numbers to check every week, with one definition for the whole team.