Is your agency’s cash flow going through times of volatility? Learning how to shorten your sales cycle may fix it.
The length of the sales cycle can greatly differ, depending on your target demographic.
For example, sales to small to medium businesses (SMBs) typically have shorter sales cycles. As a result, these businesses have more budget flexibility and can be advantageous to your agency.
In contrast, when dealing with enterprises or Fortune 500 companies, it can take your agency up to 18 months from opening communications to making a sale.
Why does this happen?
One reason is that enterprise-level companies tend to open up their budgets near the start of the fiscal year. That means they have committed costs once they ink in their budgets. So, with this type of prospect, you will have to start discussions far in advance.
Knowing all these matters because if there’s one thing that long sales cycles attract, it’s cash flow volatility.
When you don’t understand what affects the sales cycle, you won’t know how to manage it. You also won’t know how to outline your revenue pipeline. And without a healthy pipeline, you can’t have steady cash flow, which will make accomplishing your goals that much more difficult.
Of course, you can avoid running into these issues if you learn what makes your prospects and target audience tick. Understand that and you’ll get better at selecting your ideal client.
But before going further, let’s look at some of the triggers behind long sales cycles.
What Causes Long Sales Cycles?
A long sales cycle comes down to two main components – who you’re targeting and budgeting patterns. Each one presents a valid reason for why some prospective clients take much longer to hook and convince to take action.
Who You’re Targeting
Who is your ideal client?
Many agencies dream of working with whale-size clients. Imagine the Coca-Colas or Netflix's of the world – big corporations with deep pockets and exciting projects on the horizon.
However, it’s worth mentioning that at an enterprise level, those who make decisions make them differently. That means you will have to deal with more people responsible for critical decisions within the business.
You’ll likely face different executives running separate departments or contending with a board that talks strategy and discusses where to spend every dollar. Also part of the equation are those who will decide the direction of the company or how they can accomplish the overall goals of the company.
With that said, are enterprise-level clients really the right audience for you?
They may seem exciting, but that doesn’t mean you’ll make a good fit.
And before an agency can consider you, it must have an allocated budget for your type of services.
But that may not always be the case.
This brings us to our next point…
How the Potential Client Budgets
A primary sales cycle length determining factor is budgeting.
At an enterprise level, it looks something like this: the marketing department tells the financial department what budget they need and what goals they want to accomplish for the following fiscal year.
As already mentioned previously, this leads to having a budget set in stone far in advance. And in many instances, this means awarding agencies within the first 30, 60, or 90 days.
But in those cases, there was already a proposal on the table.
The decision was already made on who the company would work with. So, if you miss that timeline of getting in front of the client or brand, you’re unlikely to get another chance for another fiscal year.
If there’s money left, it won’t be for big projects typical of anchor clients.
Even if a big business were to award a project, it wouldn’t do so easily. Think of all the risk management, interviews, procurement, and RFPs that come with the territory.
Big clients want to know everything about the agency they might work with, from ROI to how much time and how many team members work on the account. It’s all about figuring out if it’s best to use internal resources instead of outsourcing.
In the end, chasing whales can be some of the most anxiety-driven and expensive business you can do.
On the other end of the spectrum, you have SMBs. Imagine going from an 18-months sales cycle down to a 60-days cycle. In some cases, shorter than 30 days, realistically.
Why?
Because there aren’t that many hoops to go through before making a decision. You can end up talking directly to the C-level executives and sell them what they need that aligns with their strategy.
Also, budgets aren’t earmarked as far in advance, and it’s rare to go through risk management. SMBs can reallocate money much easier, which makes the sales cycle quicker.
How to Mitigate the Issue
With that in mind, you don’t have to run away from enterprise clients. If you want to target them, there are ways to mitigate the problem and give your agency a better shot at getting profitable projects.
First of all, you have to get clear on who you’re going after. Understand the target demographic and the type of client who appears to be an ideal client.
From there, you have to dig deeper into how your client operates. How do they function? How do they budget? When do they open up the budgets and accept fresh pitches?
It’s also crucial that you get in front of prospective clients. Get in front of them at the right moment to ensure you can offer a proposal before they close their budgets.
Let’s say one of your ideal clients ends their fiscal year on June 30th. You’d want to have a proposal ready and start a conversation sometime in April. March would be even better. Doing enough research ahead of time may even allow you to open a line of communication come January.
It’s all about giving them time to request and get the budget approved to be able to work with your agency.
Not All Clients are the Same
There isn’t a more accurate statement when it comes to analyzing the length of the sales cycle. No one can stop you from going after the biggest fish in the ocean. But you have to understand that your agency’s cash flow health depends on your revenue pipeline.
Your revenue pipeline depends on your ability to pick the best clients for your business.
Not every agency can survive solely on enterprise-level projects. They’re often hard to land and may not even be as profitable after you factor in the costs of trying to close that type of client.
Get a better understanding of your target audience to give your agency the best chance to succeed. Learn the playing field and how to spot the best opportunity to submit a proposal.
