What is lead time in sales management: Answered by the experts

Jo White posted in Sales October 8, 2019

At its simplest, lead time is the time it takes from the beginning of a process to its execution.

If you manage a sales team you probably already know that many factors contribute to a successful sales conversion rate. And tracking (and reducing) this rate is likely what you’re most interested in.

A shorter lead time can reduce overall carrying costs, streamline operations and improve productivity of your team and entire operation as a whole. So, why is tracking the time it takes to convert a deal more important than pounding the pavement and ensuring that your pipeline is always full of leads?

Wouldn’t more leads naturally lead to more revenue and isn’t more revenue the ultimate goal? Well, yes, increased sales is always good but ensuring leads actually turn into a customer should really be your top priority, and knowing exactly how long that takes (and where in the process your sales team hits snags) is crucial information. So, how can you effectively track lead time in your sales pipeline? Read on to find out.

Lead time affects sales forecast

Your sales pipeline gives you an overview of all the prospects your team is currently targeting, no matter how long it might take to convert a lead into a customer. In order to know if your sales pipeline is healthy, you need metrics on your sales cycle, or the anticipated lead time to close a deal.

A sales forecast, where you estimate how many deals are likely to close in a particular time period, is just as important as your sales pipeline. Businesses rely on accurate forecasts to make effective adjustments to the pipeline or marketing and sales strategy. Leaders in sales and CRM know that understanding the lead time needed to close is a critical factor in determining the perfect number of leads in a healthy sales pipeline.

Lead time helps categorize prospects

If you know your typical sales cycle, you’re in a better position to ask the right questions about customers who don’t fit the mold. The longer a prospect lingers at one stage, the less likely they are to advance through your pipeline, according to Inflexion Point. That is, in most cases. Other times, a valuable prospective client may have longer-than-usual legal processes, or more people who need to approve a decision.

There are of course, exceptions. Some clients, in specific industries, may have an unusually long decision making process and need multiple people to sign off before they can commit to a new deal. You need to make a judgment call about when it makes sense to continue actively working with a prospect or focus sales efforts elsewhere.

Lead time can’t be rushed…too much

Refining your sales process to eliminate unnecessary steps and keep momentum going is an exciting idea. While there are certainly actions you can take to prevent hot leads from fizzling out in your pipeline, Jill Konrath, author of More Sales, Less Time, offers an important warning.

Pushing too fast will chase away someone who otherwise might have been a valuable customer. When she downloaded a free ebook from an interesting site, Konrath found herself hounded with three emails and a phone call within the next hour! The takeaway is that respecting a reasonable lead time to build a genuine relationship is a far better strategy than pushing to hit an agreed target.

Lead time impacts sales growth

Matt Smith, of Sales Hacker and Full Stack Sales, points out that increasing revenue is often a matter of making minor improvements to several different elements of the sales process.

Your sales cycle, conversion rates, average deal size, and number of open opportunities all work together. Focusing too hard on stuffing your pipeline with hundreds of new prospects won’t do you any good if the sales process lags too long to bring in revenue the company needs. You might get a greater impact from working more effectively with the leads you have than trying to collect as many new potential targets as possible.

Lead time doesn’t stop with the sale

The sales pipeline gets a lot of attention, and rightfully so. Experienced sales pros know that closing the deal opens another relationship that needs just as much, if not more, careful nurturing. The customer lifecycle has its own lead time rhythm to grow a one-time customer into a devoted advocate for your brand.

Connecting sales, marketing, and customer service into an integrated partnership builds a stronger foundation for customers to get the attention they need. Lead time here is a matter of answering:

  • How long does it take for the customer to receive and implement the product?
  • When do they need a check-in to make sure everything is working okay?
  • What schedule will we follow to introduce other opportunities?

The ultimate goal is to pinpoint the right balance between following through with outstanding service on the purchase the customer already made, and identifying opportunities for up-selling or cross-selling to deepen the relationship. A strong customer relationship time line follows through on the genuine rapport you established in the pipeline, building trust so the customer becomes a natural advocate.

Lead time captures far more nuance than a simple number about customer conversion time. Understanding this metric will enable you to more accurately predict revenue and nurture customer relationships, both before and long after the first sale.

Need help tracking lead conversion times for your sales team? Capsule’s pipeline view organizes your opportunities under their current milestone so you can track their sales as they progress through the sales process, ensuring you have a strong handle on each team member’s conversion time throughout their individual pipelines. The visual layout ensures all team members can see what they need to do to get their job done. Contact us today, let us help you track and manage sales opportunities so you can easily see how well your business is doing.

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