Most of us wish each other a “Happy New Year” on the 1st of January. Different cultures, however, celebrate the new year on different days- Chinese New Year is usually late January/early February; Rosh Hashanah, the Jewish New Year, is celebrated in early fall; and various Nava (new) Varsha (year) celebrations take place in India in March and April. Although most company budgets and sales plans restart on January 1st, the Sales New Year actually begins 3 months early in Q4 of the previous year.
Below are the top 4 reasons that the sales new year actually begins in Q4:
#1 – Sales cycles require time
The first reason the Sales New Year starts in Q4 is simply because time passes between the initial sales call and the close. Let’s assume that a sales cycle is between 60 and 90 days. If we add in some extra time to compensate for end-of-the-year holidays, this means that prospects that enter the sales cycle in Q4 should close sometime in Q1 of the following year. For sales to begin closing at the beginning of the year, salespeople must begin working those deals in Q4.
# 2- Customers plan annual budgets in Q4
At the end of the year, businesses create plans and budgets for the following year. This is the perfect time to make sure prospects are aware of what your business offers so they can include line items in their budget for your products and services. Trying to make a sale in January could be difficult if your prospect has not already planned for the additional expenditure. Even if the sale is not closed in Q4, getting a proposal in front of your prospect could greatly increase the chances that they will be able to make a purchase in the new year.
# 3- End of year is ‘Spend it or Lose it’ time
Businesses may have money left in budgets, and if they do not spend that money before the end of the year, they will lose that money. If a salesperson proposes to a business that has money left in their budget, it could quicken the selling process because that money must be spent in Q4. The business may also be more willing to try out a new service or product using money that would otherwise be lost.
# 4 – Recurring monthly sales are exponentially more valuable early in the year
Companies who sell subscription services with monthly recurring charges have an extra incentive to bring in new customers as early in the year as possible. Even businesses that sell equipment or other one-time products have professional services and maintenance programs that bill monthly. The Rule of 78 tells us that bringing in 1 new customer every month beginning in January equates to 78 months’ worth of customer billing. Closing a deal just one month earlier adds an entire month of billing to your year. For these types of businesses, customers that begin billing in Q1 can make (or break) the entire sales year. The best way to ensure a healthy amount of customers in Q1 is to start the sales process in Q4.