Speed Stuns - Calculating Sales Velocity whatsapp icon

Speed Stuns – Calculating Sales Velocity

Sales velocity reveals your company’s overall health and identifies four distinct areas where you can improve your strategy.

February 15, 2022

Dariush Soudi

gladiator

 

Sales velocity is a metric that measures how quickly you convert leads into customers. Calculating it will reveal information about your pipeline, sales team, and overall business health.

 

The sales velocity equation’s results reflect the health of the company, the overall effectiveness of the sales team, and where the team can improve sales productivity to help meet revenue targets.

 

Sales velocity is an important metric because it shows how long it takes to close a deal or complete an opportunity. Understanding how people move through the pipeline and where they get stuck is important because it will help you identify problems at every stage of the pipeline, from lead generation to close.

 

This is especially useful when you need to assess the impact of changes to your product or strategy, as well as identify areas where you might have a longer sales cycle and plan accordingly.

 

How to Calculate Sales Velocity

 

Multiply the number of opportunities in the pipeline by the value of your average deal and win rate to determine your sales velocity. Then multiply that figure by the number of days in your typical sales cycle.

Sales Velocity = (Opportunities x Deal Value x Conversion Rate) ÷ Length of Sales Cycle

 

 Deal Value 

The average amount sold in each transaction

 

Opportunities

The total number of leads you’ll work through in a given time frame. Calculate this figure at the organizational level or by rep, region, or customer type.

 

Conversion Rate

Over a given time period, the percentage of leads that become paying customers.

 

 Sales Cycle Length

How long does it take for a lead to turn into a customer? This figure is determined by the product, price, and number of sales cycle steps.

 

Any of these four areas can have an impact on your sales velocity. As a result, you’ll want to keep track of each metric in order to optimize your pipeline.

 

When it comes to tracking and optimizing velocity, it’s important to remember that consistency is key. What is the definition of a conversion? How do you know when a lead has turned into an opportunity?

 

Of course, this varies by organization, but it’s critical to define your variables and stick to them over time.

 

Improve your Sales Velocity

 

Tracking performance, like all sales metrics, is the first step toward improvement. If your sales velocity math doesn’t add up to an effective sales strategy (prospects stay in the consideration stage longer than average or drop off right after receiving a free trial), you’ll need to work on one or more of the four variables listed above.

 

You can speed up the cycle while also increasing opportunities, win rate, and average deal size. 

 

Sales Velocity Demands Attention

 

Sales velocity reveals your company’s overall health and identifies four distinct areas where you can improve your strategy.

 

Running velocity numbers can reveal where your efforts are paying off, whether it’s creating a more balanced pipeline, tweaking your sales pitch to better align with customer pain points, or targeting better leads with a laser focus.

 

Although sales velocity is all about speed, it is also beneficial to play the long game. Concentrate on high-quality leads and don’t be afraid to reject leads early on. Review data on a regular basis to ensure you don’t miss out on a chance to improve closing speed.

Business

Marketing

Author

Dariush Soudi

Founder, Arena

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