Sales Cycles Are a Widely Used Indicator of Economic Health. Founders Must Identify Market Challenges and Close Deals.
There are two sides to a coin, we live in a time where markets are in a constant state of uncertainty and flux; startup founders must consider both sides to determine the best course of action for reducing burn, accurately estimating growth expectations, and calculating the right amount of runway to keep them funded.
Right now there is a lot of talk about slowing consumer demand. This discussion is understandable as a lot of companies have dropped their sales projections and share prices have plummeted. It’s easy to be pessimistic about the coming months, but we should remember that many of the world’s greatest companies, such as Airbnb, were founded and grew exponentially during recessionary times. So, even if things are tough or look bleak right now, there is still room for new businesses to thrive in the midst of difficult economic conditions.
Successful startups are known for adapting to market conditions, and sales cycles are a widely used indicator of economic health. Sales cycles are the average time it takes for a customer to go from first contact to a closed deal. The longer the cycle, the less likely it is that you will be able to close the deal to meet your quarterly sales targets, and it may be an early indicator of slowing demand.
However, just like a coin, every situation has two sides: there is always an opportunity for profit on one side of every business idea and a possibility of failure on the other, and which side you tend to focus on is entirely up to you.
For example, instead of assuming that longer sales cycles imply slowing demand, we can look at the other side of the coin to gain a more balanced perspective. We can also conclude from market research that sales cycles are lengthening for most product categories, but this does not necessarily imply that overall demand for the product category is slowing. It could be that customers need more time to do their research before making a purchasing decision. In many instances, when longer sales cycles are noticed, a company’s sales, marketing, and product team should figure out why the sales cycle is getting longer and how best to demonstrate ROI and value to their prospects. In most cases, it could be due to one of the following reasons:
• Currencies and exchange rate fluctuations
• New government funding, grants and incentives
• Adoption/investment of emerging technology trends
• Privacy and data security regulations
• Pricing models changes ( pay-as-you-go, freemium)
• New purchasing approval workflows and process
• Increase in competition or support of local businesses
• Consumer behavior and priorities are shifting
• Consolidation to all-in-one platforms
• Need to prioritize integrations vs. core features
Founders must identify market challenges and devise solutions to what is preventing customers from closing a deal. They should also continue to invest in stability and growth while also doing whatever it takes to make the right informed decision in order to reduce fears, doubts, and uncertainty among their team, and investors.
So, if you believe you are in a difficult situation, look for positive outcomes and opportunities on the other side of the coin. And keep in mind that some things are simply out of your control; slowing consumer demand does not always imply no growth or profits; you simply need to balance your expectations when it comes to the rate of growth and your revenue targets. Whatever happens, there will always be ups and downs. Recognize when to slow down and when to speed up.
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