The long, long sales cycle

Long sales cycleOne of my favorite sales podcasts is the SalesRoundup Podcast, the hosts, Mike and Joe, are funny and are actually selling – i.e. not trainers, and it shows in what they say.

That being said, I have had a slight bone to pick with them for quite some time. I LinkedUp with Joe over a year ago and we exchanged a few emails talking about sales cycles. I explained that a sales cycle in my industry (advanced materials) can be as long as five years. Well the next Podcast I hear them taking a few shots at an unnamed person (me!!) and making fun of me a bit. I was jogging when I was listening to it and it really fired me up for about a day – I even shot them an email about it. So this post is to clear the air and explain my very complex sales cycle.

Among other things, I help develop and sell advanced metals to the aerospace industry. From the time of a first call with, say an engine OEM, to a production sale it can indeed take over five years. Would you feel comfortable flying across the country on an unproven material? There is so much testing and evaluation that you can switch jobs before you make the big sale.

So what is my solution? I obviously can’t wait for five years to make a sale. The solution is twofold. First, you better have more than one material at various levels in your sales funnel, or you better make the majority of your pay via a salary for the first few years as opposed to commission.

The second solution, and what I choose to do is to find more forgiving and risk taking markets to sell to before your main aerospace customer blesses it. Let me show a quick example to keep this post from getting too long.

Let’s say that your company has a new material called Xmetal. It is strong, lightweight and will never corrode. GE and Rolls-Royce are both very interested and in the initial stages of testing. Revenue from them buying your test material is maybe $150,000 per year, and your company is probably losing money at it.

Who else can use this awesome material? How about the motor sports industry? They will die for a lighter metal that can shave a few pounds out of their chassis – there’s another $200,000 per year. The medical industry has a need for a super-corrosive resistant metal for certain surgical tools. That equates to $500,000 per year at a healthy margin.

You see where this is going? You might have to support your big breakthrough with supplemental sales in the early years so that you don’t starve while waiting for the big payday.

Oh, so it’s five years later and your material is finally approved and you got your first repeatable production order – for $7MM.

I trust that my honor has been restored, in my own mind at least.

To show that there are no hard feelings and that I still love these guys, I asked Joe to comment on this strategy and here’s what he had to say.

Heck you should be put on a pedestal for taking on a product line with an average sales cycle of five years. – And I thought nine to twelve months was long. First let me comment on your strategy. Whenever you have a cycle that transcends fiscal years (and could up to five) you really should develop a laddered approach to the business timing. In your example, you close the $7M deal in year five. Hopefully you started a second and perhaps third cycle four and three years ago respectably. This way you will have built a nice pipeline of “large” deals and a predictable success rate.

I particularly like the creativity of approaching adjacent markets to supplement your revenue in the short-term. As you so nicely pointed out you do need to generate a steady stream of revenue! Although not your prime source, adjacent markets could be what your company needs to sustain operations during the “startup” period.

One final point I would like to underscore. In your post you alluded to the fact that many sales professionals will not make it the five years needed to realize success. Having said that, I would pursuit large deals with a team of sales people to mitigate the risk of turnover systemically affecting the outcome.

As far as the honor goes, anyone who successfully takes on a product line with a multiple year sales cycle is tops in my book. Five years! Man I still think you are crazy! LOL

Make sure to check these guys out – it’s about 40 minutes a week of free sales training.

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#1 Improving Sales Forecast Accuracy | The SalesRoundup Podcast on 06.30.08 at 6:05 am

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