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What Is Sales Velocity And How Is It Measured?

You want to make the most of your time because it is valuable. Sales velocity is a gauge of how rapidly your company is turning a profit.

Have you ever inquired during a job interview about the most important sales metrics? The most likely response is “Yes.”

What if we questioned you about if you ever pressed your interviewer on their sales tempo? If your response was “Yes” the second time, you already grasp the significance of this formula in determining the development mindset and general health of a sales organisation.

If you haven’t given a company’s sales velocity any thought, now is the time to do so. Go beyond KPIs to wow your manager or potential manager when you next meet. In this RisePath post, we shall discuss everything about sales velocity and how you can use it to grow your company even further.

Sales Velocity: The rate at which deals move through your pipeline and produce revenue is known as sales velocity. An organization’s sales velocity and the amount of money they may anticipate generating over a certain time period are calculated using an equation, which uses four indicators to calculate opportunities, average deal value, win rate, and duration of the sales cycle.

The results of the equation show the state of the company, the efficacy of the sales team as a whole, and the areas where the team can boost sales productivity to advance revenue targets.

Every sales manager has a constant concern that their sales pipeline is full of empty words. Discovering a sense of urgency and generating sales velocity are crucial in today’s environment of quick satisfaction since they reveal a slow-moving or, worse yet, stagnant pipe.

How can we quantify sales velocity now that we understand what it is and why it is significant?

Sales Velocity

Methods for Estimating Sales Velocity

Start by dividing small, mid-market, and enterprise pipelines in order to precisely determine an organization’s sales velocity. You should categorise them in accordance with your company’s own definition of each of these groups.

After segmenting your market, compute the sales velocity equation for each segment.

Number of Opportunities x Deal Value x Win Rate / Length of Sales Cycle = Sales Velocity

The Four Elements Affecting Sales Velocity

The following four KPIs, which together make up sales velocity, should all already be tracked by your CRM:

  1. Number of Opportunities
  2. Average Deal Value
  3. Win/Conversion Rate
  4. Length of Sales Cycle

Let’s examine each of these in more detail and discuss how to use them to guide the planning and goal-setting for your firm.

  • Number of Opportunities – There are always a set number of opportunities in your pipeline. Make sure the opportunities are appropriate. Your bottom line will suffer if your pipeline is filled with bad leads and there are just a handful that have a possibility of closing.
  • Win/Conversion Rate – The quantity and quality of your leads will determine your average win rate. Divide the number of sales won by the total number of sales opportunities to find your win rate.
  • Deal Value (average deal size) – Time, the most important resource for both sides, is needed for every deal. By including offers or add-ons that will improve your prospect’s life while raising your average deal value and increasing the velocity of your sales, make sure you are making the most of this resource for both yourself and your prospect.
  • Length of Sales Cycle (measured in months) – the length of the sales cycle, expressed in months—should not be increased. You may shorten your typical sales cycle and close more quality deals more quickly by improving your sales process, changing your sales playbook, and occasionally adding staff to your sales team.

Sales Velocity Creation: Best Practices

1. Strive for improved sales efficiency.

First, attempt to raise your opportunities, average deal value, and/or win rate if the findings of your sales velocity equation indicate a need for more sales effectiveness.

In general, you can have problems with the numerator of the formula (the numbers above the line) and yet manage to run a successful sales organisation. However, your firm can suffer if there is a problem with the length of your sales cycle (the denominator).

One sales personnel clarifies, “I worked with a portfolio business that entered the year’s last quarter with a sizable, fat pipeline. But since none of the transactions was moving forward to the review stage, we realised we were in trouble.”

“Not carefully accounting for how quickly things progressed from opportunity to opportunity to demo to pricing negotiation to contract really cost us,” the speaker continues. Companies like this one can examine ways to shorten their current sales cycle and plan for a longer one by using computed sales velocity.

2. Extend the time frame for your analysis of sales velocity.

Second, it is best to study data over a longer period of time. Measure the sales velocity for a period of at least a quarter and up to six to twelve months. This longer sample size takes into account elements like seasonality or an abnormally protracted contract.

3. Consistently use the same variables and definitions.

Third, while calculating sales velocity, make sure your variables and definitions are consistent. For instance, when do you think a lead qualifies as a good opportunity? Does it begin when a lead completes a certain form? When do they visit your website, specifically a blog post? Or does that not happen until after they’ve arranged their first call? When doing the measurements, establish these standards as early as possible and maintain consistency.

Ways to Boost Sales Velocity

You can start working on increasing sales velocity if you have the metrics to do so. If you consider the four measures mentioned above that you use to calculate sales velocity, it seems sensible to assume that increasing velocity also entails increasing those four metrics.

1. Increasing Your Number of Opportunities

Consider acquiring high-quality leads, even if it results in generating fewer leads overall. Rather than seeing the same worn-out pipeline week after week, it’s preferable to watch opportunities arise and then vanish. Bad leads are a reality of life for salespeople, but moving on from them swiftly increases your sales velocity and profitability.

You may find high-quality leads using a variety of tactics, including:

  • LinkedIn Ads
  • Pay-Per-Click Ads
  • B2B Lead Generation Techniques

2. Improving Your Win/Conversion Rate

By securing and cultivating high-quality opportunities, like as recommendations or prospects who have already shown a strong intent to buy, you can increase your win rate. To do this, you ought to do the following:

  • Prospects with insurmountable obstacles should be removed from the pipeline.
  • Establish precise next actions for top-notch prospects.
  • As soon as possible, involve the decision-maker.

3. Raising Average Deal Value

Never push a product or service on a consumer who doesn’t need it; doing so will only result in lost prospects and dissatisfied new clients. Instead, identify their buried issues and go above and beyond what they anticipate, such as:

  • A good or service accessories for easier use
  • After-sale services including product training and guides

4. Reducing the Sales Cycle Length

The faster sales can be concluded, the more effectively your team works. There are numerous techniques to shorten your sales cycle, such as:

  • Automating routine work.
  • Determining shared objectives for each sales call.
  • Investigating potential customers’ concerns before replying.
  • Being absolutely upfront about pricing from the beginning.
  • Making contract signing for customers from any device absurdly simple.
  • Concentrating on your top-performing channels

After going over some strategies for boosting sales velocity, let’s talk about how discounts may also have an impact.

How Sales Velocity Is Affected by Discounts

Discounts aren’t always the best approach to boost sales, but you can potentially shorten your sales cycle and boost your sales velocity by giving your prospects incentives to close sooner.

Make sure your representatives are well-versed in how to use discounts to their advantage in negotiations rather than limiting your business’s expansion and acting as a crutch for struggling sales teams.

Monitor and Boost Your Sales Velocity

A strong pipeline or a larger sales force alone won’t keep a company expanding; in fact, they may even have the reverse impact. Measure your sales velocity, understand the implications of the findings, and put practical measures in place to boost it right away.

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