Benchmark for B2B SaaS sales cycles

When it comes to B2B SaaS sales cycles, it’s never easy to know if you’re doing good. How many days does it takes to close a deal? What factors and characteristics affect this number?

The first thing to understand is that SaaS sales cycle can vary dramatically, depending on a few factors.

What factors affects B2B SaaS sales cycles?

Target customer

Sales cycle will vary dramatically depending on what size of companies you’re targeting. And the reason is simple: enterprises have complex structures, and you’ll will have to go through a long compliance process that can take weeks or months. It also tend to take longer because you have to sell the solution to several people, not just your end user/department. Every time a new stakeholder is involved in the buying process, you have to re-sell the product.

Let’s say you’re selling a marketing automation tool to a Fortune 500 company. It’s not enough to have the marketing director bought in, you’ll probably have to go through IT to prove you’re infrastructure is reliable and their data is safe; then procurement where they will compare your proposal with at least two others; then finance to have you registered as a vendor, align payment conditions and methods. It ain’t easy.

“Every time a new stakeholder is involved in the buying process, you have to re-sell the product”. Tweet this quote

Price

That might sounds obvious, but the more expensive your product is, the longer it will take you to sell it. Let’s say your selling a simple self-service tool that costs $5 a month; There’s a chance your target user will enter her credit card info and buy your product without thinking too much. It just not worthy the time to overanalyse something that costs so little, you simply try it.

Now if you’re selling a solution that will cost the company more than a $100,000 per year, it will certainly take longer. People don’t want to make such commitment/investment unless they’re sure you’re exactly what they need. Commonly it’s even necessary the investment is planned a year ahead, usually around Q3 when companies are planning budget forecast for the next year.

Payment Terms

Same as price, if you ask customers for longer payment terms, such as annual contracts, it will certainly take longer for you to close the deal. Look at HubSpot for instance, they only sell their product if you pay for a full year upfront; There are a lot of benefits of such decision, but it’s definitely a adoption barrier and it certainly extends their sales cycle.

Broader Product

If you’re selling a complete solution that will impact various departments and functions within a company, you’ll take longer to close a deal. Imagine you’re selling an ERP that will impact they way the whole organisation works, versus selling an email marketing tool that will be using a single department. It’s pretty different, right?

If you’re a point solution, you’ll tend to have less people involved in the process and therefore will close the deal faster. Less people involved equals less analysis, less barriers, less time.

New Market

If you’re not selling to an existing market with known and defined functionality and  competitors, you’ll also tend longer to sell. That’s because before you’ll have to prove yourself useful. If a company is adopting an existing/known solution such as an payment gateway, they’ll likely to compare your features and price with competitors and make a decision.

If you’re selling something completely new, you’ll have to educate the market first, make the customer aware of the problem, present them the solution to that problem, and then show them why your solutions is the best.

“If you’re selling something completely new, you’ll have to educate the market first”. Tweet this quote

Numbers

Ok, all these factors make sense but we want numbers, right? Here’s are some overgeneralized data to give you a rough sense, captures from a response Jason Lemkin gave on a Quora post about this topic.

Keep in mind that these numbers can vary dramatically, depending on the factors above.

These are sales cycles from High Probability Opportunities. i.e., prospective customer has said there is a high likelihood she will buy, says it is budgeted (if deal size is big enough to matter), and sales rep believes this is true.

It may take one call to get you a High Probability Opportunity. It make take you 2 years. So I’m not counting that time, though you may be.

Once you are there:

  • Deals ~$2,000 in ACV should close on average within 14 days.
  • Deals ~$5,000 in ACV should close on average within 30 days.
  • Deals ~$25,000 in ACV should close on average within 90 days.
  • Deals ~$100,000 in ACV should close on average within 90-180 days depending on # of stakeholders.
  • Deals $100,000+ in ACV will take on average 3-6 months to close. Of course, some faster, some shorter.

Leo Faria
About the author: Leo Faria is a SaaS and analytics expert. Founded Saasmetrics, a subscription analytics solution that help companies to grow and retain their recurring revenue by providing accurate business metrics and insights. Get your free copy of my latest book “The essential SaaS metrics guide“.

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  • Cristiano Wuerzius

    Great post, Leo! One aspect I would add is that since “sales conversations” are already taking place online, without the intervention of the rep (its said that 60% of the decision is already take at the time when a prospect talk to a rep), a sound mkt strategy can reduce significantly the sales cycle by providing great content online. This way leads come hotter and buy sooner. Companies with a well tuned mkt strategy tend to have shorter sales cycles than those without it.

    • Hey Cristiano, thanks for your comment. That makes a lot of sense. Timing is definitely affected by how war the lead is, and content marketing makes a huge difference for sure.

  • Hi,

    I personally believe that successfully generating sales leads online for B2B products/services may appear to be counterintuitive. It is known to all that B2B businesses are heavily dependent on building personal relationships nurtured over several years and sales prospecting.

    Believe it or not, I know quite a few B2B sales professional who do not prefer to network online and cite reasons such as – ‘not enough time’, ‘not my thing’, ‘not efficient’, ‘not how I work’ etc.

    I strongly believe that the B2B players that do not invest in online presence are losing out credible chance to bag more credible leads. Hence, the companies should consider these key five factors if they are serious about conveying the qualified visitors to clients.

    – Look and feel of the website matters
    – A good portfolio page and inclusion of case studies
    – Informative content
    – Employees’ expertise to handle customers
    – Social media presence