SaaS Buying Cycles

Vendr is one of the world’s largest software buyers, having processed more than $3B of software spending which gives them a unique vantage point on SaaS trends.

Its last ‘SaaS Trends Report’ examines many interesting aspects such as software pricing, tech stack consolidation, etc., but here I will center on buying cycles since they have greatly changed.

In a nutshell, in the last three years, buying cycles have increased 37% for net new purchases, from 32 to 44 days on average.

As companies intensify the scrutiny over software spending, more people get involved in purchases — the CFO is often the decision maker – contributing to the elongation of buying cycles.

And now, negotiations alone constitute 54% (24 days) of the entire buying cycle.

Moreover, complicating matters further, companies are treating renewals as if they were new purchases. Renewals, on average, are taking 15% more time than net new purchases, clocking in at 51 days.

Why does this matter?

Buying cycles increase when buyers are negotiating more aggressively and proceeding into deals with caution.

Consequently, software companies are forced to invest more in S&M to get every deal across the finish line, creating a significant impact on CAC and working capital.

Conclusion

The remedy is well-known: greater pipeline-to-quota coverage ratios by either increasing the top of the funnel or reducing the account executive headcount.

That’s why Fabrica Ventures is investing in Outreach.io, the sales engagement platform market leader.