How to rev up your sales cycle.
For salespeople, this should be the best of times. After years of languishing, corporate spending finally rebounded in 2006, and analysts expect the shopping spree to continue. Yet selling is just as hard as ever and at many companies, the sales cycle--the period that starts when a lead is identified and ends when a contract is signed--has not budged at all. Thanks to increased competition and the ease of comparison shopping online, buyers are driving ever-harder bargains. And with e-mail and IM replacing phones, it's getting tougher to set up a meeting in the first place. Nonetheless, you can shorten your sales cycle if you ignore the conventional wisdom and approach your market with a fresh eye. With that in mind, let's meet four firms that have managed to do just that--shorten their sales cycles without cutting prices or sacrificing profits.
Company: Telegraph Hill Robes, San Francisco
Customer Base: Upscale hotels and spas
Old Sales Cycle: Six months to two years
New Sales Cycle: Three months
Telegraph Hill makes bathrobes for upscale hotels with spas. When the company launched 10 years ago, its typical sales cycle for hotel clients was a maddening two years. By 2005, CEO Maria Spurlock had shaved it in some cases to about six months--but even that seemed too long. Most of Telegraph Hill's clients were large established hotels. To close a deal, the robes had to pass muster with at least two gatekeepers with very different points of view, the general manager and the head of housekeeping. Then Spurlock got the idea to sell robes to hotels still under construction. Oftentimes, new properties have neither a manager nor a housekeeping staff. Instead, the key decision maker is the interior designer, someone who is more likely to be open to Spurlock's pitch.
To close a deal at a new boutique hotel in New York City, for example, Telegraph Hill pitched the interior designer a few months before the hotel opened. "Six to eight weeks before the formal opening of a hotel, there's something called a 'soft opening," Spurlock explains. During that period, a hotel needs only about 40 percent of its robes; that gave Spurlock the chance to snag an initial order by coordinating colors, fabrics, and logos to meet the designer's specs.
By working with designers, Spurlock has cut her sales cycle to three months or less. Last year, revenue jumped 38 percent, to $2.4 million, one-third of which came from sales to 24 new hotels and hotel renovations. And many of the interior designers from that first batch of business are hiring Spurlock for other projects.
There's more than one way into a sale.
Company: MicroTek, Downers Grove, Illinois
Customer Base: Large high-tech firms
Old Sales Cycle: Nine months to a year
New Sales Cycle: Three to six months
MicroTek manages the logistics of corporate training events. In 2005, when Kevin Hughes joined the company as vice president of sales, large companies were beginning to invest more in worker training and were increasingly willing to outsource that task. Yet it was taking MicroTek's sales staff as long as a year to close a deal. Hughes was determined to figure out how to get to top prospects sooner and book sales faster.
In the past, the company's 13 salespeople would contact prospects by phone a few months before a big training event. But Hughes figured that training directors in the throes of putting together an event were overwhelmed and annoyed by these calls. So instead, MicroTek reps began casually asking prospects about the next season's schedule--events that were six to nine months away--and inviting them to take a tour of MicroTek's facilities. A number of prospects took them up on the offer. The visitors got to observe other MicroTek clients conducting their events, which helped them visualize how their own sessions might be organized. Sales reps mentioned that the company offered a generous cancellation clause that made reserving space virtually risk-free. The company also offered clients a free logistics software tool to help them manage event content and registration.
Hughes's new approach-- he calls it "laid back but targeted"--paid off. Customers occasionally made reservations right on the spot. Besides that, Hughes followed up with qualified leads who declined the tour and learned that they often had their own in-house training facilities. Thus, the tour strategy provided MicroTek with a valuable screening mechanism. "We want to find out earlier if someone's not interested," Hughes says. The company's average sales cycle has dropped to as short as three months and sales increased to $42 million last year, up from $26 million in 2004.
Cut your losses as early in the process as possible.
Company: The Benecon Group, Lancaster, Pennsylvania
Customer Base: Large companies, retailers, colleges
Old Sales Cycle: 12 to 18 months
New Sales Cycle: Six to eight months
The Benecon Group is a big deal in insurance in central Pennsylvania, with the distinction of being one of five "preferred brokers" for Capital BlueCross and other major insurers in the area. Nonetheless, Benecon doesn't enjoy automatic entreé to the region's leading corporations. And with health insurance such a touchy topic at most companies, closing a sale was taking as long as a year and a half. So CEO Sam Lombardo took an unusual step: He joined forces with some of Benecon's direct competitors in the insurance industry.
Sales experts point out that one of the biggest selling challenges today is simply getting a meeting. Lombardo's solution was to cultivate relationships with 24 independent brokers who had good leads. Let's pitch the account in tandem, he proposed. The brokers would bring the leads; in return, he would offer access to Benecon's wider selection of insurance products, as well as professional resources and expertise. Commissions and fees would be split. Initially, brokers were reluctant to share leads, but many decided to give it a try. "They realized they would rather have 50 percent of something than 100 percent of nothing," says Lombardo.
Lombardo now thinks of these independents as an extension of his own eight-person sales team, regularly accompanying them on sales calls. His network of outside brokers now numbers 15 to 20, and broker-related sales made up a quarter of Benecon's $12.5 million in revenue last year and led to nearly all its new corporate accounts, he says.
In a hyper-competitive market, even rivals are potential allies.
Company: Acumen, Richmond, Virginia
Customer Base: Midsize to large manufacturers
Old Sales Cycle: Nine months
New Sales Cycle: Three to six months
Before Phil Perkins will sell you anything, you have to really, really want to buy. Perkins is the CEO of Acumen, which sells and services accounting software systems. Acumen's software is complex, and its contracts reflect that--often topping $100,000. Perkins wants to weed out tire kickers and those looking for free consulting advice as early as possible and instead focus on higher-quality clients.
You'd think this would add weeks to the sales cycle. In fact, it has had the opposite effect. By spending more time in the discovery phase, Perkins points out, far fewer deals get stalled later on. One Acumen employee now does nothing but prequalify leads on the phone. Sales experts note that salespeople often draw out the sales cycle unintentionally by aiming their pitches at prospects who are too low on the totem pole to make purchasing decisions. Acumen's lead screener, a 25-year-old woman with a great personality and impeccable phone demeanor, goes after people at the top of organizations. "She's fearless," says Perkins.
Once the right contact is identified, a meeting is scheduled. But before Perkins and his two salespeople begin touting Acumen's expertise or quoting prices, they submit would-be buyers to a series of detailed questions--actually an eight-step process Perkins designed--to determine whether the companies should be doing business together in the first place. Why do you want to upgrade, they'll ask. What do you believe you stand to gain by doing so? They ask for financial information and run the data through a return-on-investment software program.
Naturally, some prospects drop out in the midst of the questioning. "But I'd rather win fewer, more qualified deals," Perkins says. These days, Acumen does fewer deals but they are larger and more profitable. New customer sales, he says, hit $1 million in 2006, or 10 percent of total revenue of $10 million. And despite the exhaustive vetting and questioning, Acumen recently set a new record: It closed a major deal in just eight weeks.
The sales process begins long before a meeting is held.