"Should a deal take this long?"

It's more about the number of people involved and then the deal size

Founders who are working on closing their first $1M+ in revenue often ask, “Should a deal of this size take this long?” The answer is, it depends. To simplify, yes, larger deals typically involve longer sales cycles. However, the more important consideration is understanding how many people must be involved in the purchase decision based on the deal size.

In the AI/ML market, you sometimes hear of a startup hitting the lottery and closing a $500K+ deal in under 30 days. This is usually because standard spending on AI/compute-intensive workloads is abnormally large, and buyers have much larger budgets where $500K is a relatively small portion of their annual budget. The buying process is typically streamlined, or there’s an urgent need to purchase. However, for most companies, a combination of deal size and buying process complexity impacts how long a deal will take to close.

The diagrams below present benchmarks on the number of stakeholders involved in a sales cycle. Please keep in mind that this is a general framework, meant to illustrate that the number of people required to reach consensus before making a purchase usually slows down the deal. The average deal can involve many more stakeholders (primarily end users), especially in Enterprise deployments.

Note: Notice how the Approval Chains are in parallel! Run these in parallel with the technical evaluation process as often as you can to accelerate the path to close.

The single user (sometimes PLG or “Assist”) deal $100/mo.+

Technical Stakeholders

The user should make the final decision on the product, their peers can sign up on their own as well. 

Purchasing Process (Approval Chain)

These are straightforward purchases that typically require little to no approval. However, in some environments, companies may now require management approval for purchases that were previously made without any.

The SMB deal (~$5,001 - $15,000)

Technical Stakeholders

There should be a few key stakeholders involved in the decision. While there may be additional end users, the evaluation complexity should be relatively low. At this stage, an extremely enthusiastic champion of your product should be asking their boss to approve their favorite solution. They have come prepared, showing how and why they need your solution and why they need it now.

Purchasing Process (Approval Chain)

These deals should close in less than 30 days. At this spend threshold, a quick thumbs up from Finance is usually required. Additionally, your solution will likely need to be reviewed by Legal and Security. Avoid redlines at this spend level due to the time and potential legal costs associated with the review process. Ensure you have a strong Terms of Service in place to avoid legal scrutiny at this dollar amount, and make it clear to the signer that redlines require a higher spend threshold.

The mid-market sized deal (~$15,001 - $50,000/yr)

Technical Stakeholders

The main difference with deals of this size on the technical evaluation front is that you typically start to have more end users and a manager involved, but not the buyer at the beginning. You need to reach a consensus with a group for various reasons: some people have other tool preferences, some don’t want to use a solution, and a manager or leader may not understand why they need a solution like yours in the first place. This requires more touchpoints to get everyone on board.

Purchasing Process (Approval Chain)

This is where you’ll need to start having a business case and cost justification for the purchase. Legal will want to delve into protecting their company from potential issues regarding data access, Limitation of Liability, Indemnification, etc. Security will usually want to conduct an audit, and most will be seeking a SOC 2 Type II certification (or an indication that you’ll have this soon). To avoid long sales cycles, you need to run Finance, Legal, and Security processes in parallel. You should be using a Mutual Action Plan with all key technical stakeholders to ensure the deal closes in a timely fashion.

The Commercial sized deal (~$50,001 - $150,000/yr)

Technical Stakeholders

As you grow, more end users become involved. Typically, at this stage, the main difference is that you have more touchpoints with stakeholders you aren’t familiar with in the middle of cycles (such as an unknown PM, an eager Staff Engineer, or even the actual decision maker). You need to keep track of who is involved and who needs to give technical approval to ensure you achieve the technical win.

Purchasing Process (Approval Chain)

Most of the same applies as the mid-market sized deal, but the review process usually requires a more in-depth examination from each team. It’s essential to run all parts of the approval chain in parallel, or a 90-day close will be a tighter window than you think! In deals like this, it’s important to start seeking clarification on the process and steps for each domain (Finance, Legal, Security). You also need to make proactive recommendations. An example:

“As we start the security process, have you run this by your team yet? Have you shared our security documentation with them yet? Okay, great. What are the main areas of concern they have so far? I know they’re busy and will want to address everything async, but I’d like to find time to address specific areas in question. I’ll send a Loom walking through our security diagram to start, but it sounds like we’ll want to find time with [Person] to get this over the line. What’s the best way to coordinate a time? Can you help with this, or should I reach them directly?” 

The Enterprise sized deal (~$150,001 - $500,000/yr)

Technical Stakeholders

At this scale, the complexity arises not only from the use cases and the number of stakeholders but also from reaching a consensus across multiple teams and business units. The deal becomes much more "emotional," requiring you to address all primary concerns related to achieving success criteria and the political dynamics among individual contributors, managers, their leaders, and executives at the company.

Purchasing Process (Approval Chain)

The main change at this stage is that your deal now has visibility at much higher levels, sometimes including the CEO, depending on the company's size and the importance of your solution to their current and future business plans. Finance, Legal, and Security will seek final approvals from executives before moving forward. This process is time-consuming due to busy schedules and varying opinions, preferences, and requirements to pass each gate in the Approval Chain. We also recommend as deals get to this size you start to scope pricing and scale early with a Partnership Onboarding Plan.

The Strategic sized deal (~$500,001 - $1M/yr)

Technical Stakeholders

This is where technical and business considerations start to blur, as you aim to position your unique value to an Executive Sponsor who is pressuring their leadership to hit aggressive goals and OKRs for the coming quarters and throughout the year. Your technical use case needs to be obvious and strategically aligned with what the business aims to achieve. This is easier said than done, as many stakeholders need to be convinced that your solution is the right one for the company at this size and scale. There are many reasons why deals of this complexity can take a long time, but you need to become an expert at parallelizing the technical requirements, onboarding, and primary objections of each team at the IC —> Leadership levels. This is where hiring a Strategic Account Executive can be useful when you are ready!

Purchasing Process

The nuances are more case dependent on the company you are working with and their size. Sometimes, deals of this size always require CEO approval, at other organizations, the executives are much more senior and can control the processes themselves up to a threshold well >$1M. For the sake of this exercise, we’ll keep it here (for now!). 

There are many variables that contribute to the complexity of why deals can take more time, but this should help you, as a Founder-led seller, start to understand why your bandwidth feels even more limited with slightly larger deals. You’re likely doing the right things, but building clarity around the technical evaluation and buying approval chains will allow you to have more certainty about how long deals will take to close and when you can expect to hit your revenue milestones.