Understanding the Engineering Sales Cycle

Whilst it’s true that every industry suffers from workload fluctuations, the engineering sector seems to be stricken with peaks and troughs more than most. Some months can find many companies full to capacity, whereas others will see the same organisations scrabbling for work. But why is this? And can it be overcome?

What causes peaks and troughs?

The pace of the subcontract engineering industry is heavily dictated by the industries that feed into it. For example, sectors such as Formula 1 and autosports are generally seasonal; in turn, subcontract suppliers who service these industries will find themselves busier during peak times and quiet out of season. There were also a number of oil & gas-focused suppliers who suffered when that sector tailed off a few years ago. The result is peaks and troughs in workload, which cycles in line with the industries that the supplier serves.

Subcontract engineering companies can lessen these effects by not putting too many eggs into one basket - for instance, even if you focus primarily on one or two specific sectors, it’s also good to build a base of customers from alternative industries to act as a safety net.

Another common - and completely avoidable - mistake that suppliers make is to become complacent, with too much focus on existing customers and not enough effort put into finding new ones. This is especially true when suppliers are in a ‘peak’ period, forgetting that a trough could loom within the foreseeable future.

I recently spoke with a prospect whose attitude towards new business is exactly as it should be. ‘We’ve been really busy recently,’ he explained. ‘But that hasn’t stopped us from looking for new customers, as we realise that if we plan correctly we can stay this busy, with no downtime in between.’

The real message here, is to figuratively make hay whilst the sun shines.

So, how do you plan to avoid the troughs? Well, it starts with having a good understanding of the sales cycle and the length of time it takes to win new business.

Understanding the Sales Cycle

The number one mistake that companies make is to wait until they’re in a trough before looking for new customers. Like anything, winning new business takes time and a sparsity of work is something that needs to be preempted. As the old saying goes, prevention is better than a cure.

Let’s take a look at the sales cycle and how long each step takes:

• Stage 1: Introducing yourself to a buyer:

It is naive to think that you will pick up the phone, speak to a new buyer straight away and have them immediately send you a job to quote. As I mentioned in Part 2, rapport building takes time and it’s crucial that you manage your expectations.

The law of seven comes into effect when talking to prospects and by this, I mean that you will often have to ‘touch’ that prospect several times before being considered for a job. A touch can be any form of direct contact - whether it’s a telephone call, an email, or a face-to-face meeting; nonetheless, you will have to expect to be persistent. In order to ensure that you get the best results possible, it’s worth reading Part 3, which shows you how to approach new companies with confidence.

The length of time this stage takes does vary, but a realistic estimate with an active and interested buyer is anywhere between a month and six weeks.

• Stage 2: Quoting a job:

Let’s say that your prospect sends you over a straightforward component to quote, in order to test your services. Something like this can be quoted fairly quickly. However, if they send you a full package of complex drawings then it might be a different story.

Putting together a professional quote is vital to impressing a prospect - and I don’t mean flinging over your cheapest possible price by way of an email. What I mean is making sure that your quote details exactly what is included; that it is easy to understand and laid out in an aesthetically-pleasing format. At this stage, there’s still no guarantee that you’ll win the work so don’t be fooled into treating a prospect the same way you would an existing customer!

When you also factor in the time taken to liaise with material suppliers and other subcontract engineers as applicable, the quoting process can take weeks, if not months.

• Stage 3: Manufacturing and delivering:

You’ve done it! The prospect has sent you a purchase order, turning them into one of your clients. Now the hard work really begins!

The length of this stage of the sales cycle is down to you and will be influenced upon factors such as available capacity. However, it’s worth going the extra mile for a new client and making sure that you manufacture and deliver as soon as possible. This - along with the quality of your end product - will be what keeps the prospect coming back for more.

• Stage 4: Passing quality checks and getting paid:

Provided that your components pass the client’s in-house quality checks (which they definitely should do if you want a repeat order), then you can expect to receive payment in due course.

Make sure that you are aware of the client’s payment terms before taking on their project. Some businesses work up to 90 days, which means you could be waiting a while before you’re reimbursed for your efforts. Problems could arise if you’re floating the cost of materials and other expenses against extended payment terms, whilst also trying to pay your own bills.

• Stage 5: Going back for more:

Once you’ve ensured that the client is happy with your work, it’s time to turn them into a long-term customer. This is where things get interesting, as often you won’t begin to see the client’s more lucrative projects until you’ve proven yourself with a smaller one.

By this time, it might be six months or longer since you originally introduced yourself to the client. That’s six months of building a relationship, understanding the customer’s needs, quoting and completing trial orders before you even get close to the work that’s going to fill substantial amounts of capacity.

When should you begin looking for new business?

Once you appreciate the potential length of the sales cycle, you should begin to see why you should never stop looking for new business! To survive and expand as a company, an element of foresight is key and could mean the difference between success and failure.

Although account management is important, identifying new customers should take equal priority. Many companies overlook this, but by dedicating time and effort, you can ensure that you remain busy and build yourself something of an insurance policy if work from your existing clients tails off.

Whether you decide to go it alone or employ a salesperson to do the work for you, make sure that you follow a process, keep track of your progress, and devote time to building rapport with companies you have yet to collaborate with.

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If you would like to read the previous instalments in the sales series, these can be accessed here:

• Part 1: Do you have the customers YOU want?
• Part 2: Increase orders by building rapport that lasts.
• Part 3: Calling new companies with confidence.
• Part 4: The return of face-to-face sales meetings.

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In the next instalment, find out how much business you need to succeed by using the maths of selling.