Sales Velocity is one of the most interesting metrics you can monitor. It compiles data from four different variables, giving an overview of how fast your sales team is making money. By drilling down on these variables, it is easy to identify any issues and correct them as quickly as possible.
Breaking down the formula, Sales Velocity is the sum of your opportunities multiplied by your average deal value and win rate divided by the length of your sales cycle. In a world of immediacy and constant change, you want your sales process to keep up with that rhythm. Especially if that means making more money in a shorter period of time.
Sales Velocity Variables
Let’s dig a bit deeper on each of the variables:
Number of Opportunities
The total number of leads on your pipeline, during the period of time you’re analyzing (e.g. last month). The first suspect when things don’t go as planned on the sales department is usually related to this variable: we need to generate more leads to fuel the process. However, this is not always true. You may have a healthy number of opportunities but they’re just not a good fit for you, or you may have a good amount of qualified leads coming in but the bottlenecks are elsewhere on your process.
Average Deal Size
The average amount per deal. This allows you to get a sense if your pipeline is meeting expectations in terms of how much you’re charging – and if it is indeed the most suitable value (both for you and your clients). Also, it helps identify if your team should spend more or less time nurturing certain opportunities. If the average deal size is under the value you estimated, why is this happening? Are you losing a large number of deals, misestimating value, or closing a lot of deals for the wrong amount?
This variable is very straightforward: what the percentage of deals are you winning? If this percentage is low, you may be looking at unqualified leads or issues on your sales process in moving a deal from one stage to the next. Consider having a specific buyer persona for better-qualified leads, or writing a sales playbook to help your team moving leads forward.
Sales Cycle Length
The average time that takes an opportunity to go through the entire sales funnel, from Deal Creation to Closing. A long sales cycle will hinder your revenue goals, translating (usually) to a slow Sales Velocity. However, since this variable has such a big impact, it also allows a quick fix if you need to boost your velocity. By shortening the sales cycle, you’ll increase productivity and hit goals faster. It may be as simple as adjusting your value proposition (convincing customers earlier in the process) or looking at your sales process for anything that may be slowing down your team.
The Impact of Sales Velocity
As we’ve seen, Sales Velocity is composed of metrics you are probably already getting from your CRM. It is great to put those metrics to good use. Sales Velocity allows you to see how fast you’re making money and (maybe the most important) give you knowledge on areas you can refine your strategy.
By tweaking your sales process, you can quickly get your team back on track or – even better – boost your sales exponentially.
Attentive gives you all these insights on your pipeline (and some more), focusing on providing you the best tips to fix pain points or to increase your efficiency.
Check our article How fast are you making money? Start measuring your Sales Velocity for extra tips on how to improve your Sales Velocity by addressing each of the variables. If you enhance 3 of these variables by 10% you can get a 34% improvement on your Sales Velocity.
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