If you’re looking for ways to increase your revenue, you can start by analyzing your sales velocity.
Sales velocity helps businesses accurately forecast their revenue and it gives your team a metric to keep them on track when working towards their sales goals. If you’re new to sales velocity, the good news is that all the metrics you need are already readily available to you.
Read on to learn more about sales velocity, including why it matters for your business, how to measure it using the sales velocity formula, how to improve it, and the best practices to make it work for your business.
What is sales velocity?
Sales velocity measures how quickly potential customers move through the sales pipeline, convert to customers, and generate revenue. It helps you determine how often and quickly sales professionals are closing deals and generating revenue.
Sales velocity gives teams an accurate understanding of how much revenue a sales team produces daily. A sales rep may deliver $5,000 in daily revenue to a business, while the entire sales team may bring in an average of $100,000.
Why is measuring sales velocity important?
At its core, sales velocity allows you to measure how quickly you generate revenue. The higher the sales velocity in your organization, the more money you can expect to make in any given period of time.
Measuring sales velocity allows you to monitor whether your business brings in enough revenue. But there’s also more that sales velocity can tell you about your business beyond your bottom line.
Measuring sales velocity helps salespeople:
- Create accurate sales forecasts that help inform realistic sales goals and improve relationships with key stakeholders.
- Analyze and evaluate your sales process and performance to identify strengths, bottlenecks, and other areas for improvement.
- Identify the gaps in current training/coaching and improve training for sales reps.
Tracking sales velocity gives businesses insights into what works well in their sales process and what might need a tune-up.
Calculating sales velocity: Four key metrics to know
To calculate sales velocity, your team should have sound data collection and analysis systems in place for four main metrics: opportunities, deal size, win rate, and length of the sales cycle.
Your organization should clearly understand these four variables and have standardized practices for measuring and reporting them.
Number of opportunities
The number of opportunities refers to the number of potential deals open in your sales pipeline during a specified time period.
It’s essential to be clear about what is considered an “opportunity” in your organization. Is a marketing-qualified lead (someone who has indicated an interest based on marketing efforts) considered an opportunity? Or does it need to be a sales-qualified lead (a high-quality lead who has been vetted by a seller and is deemed ready for the next stage in the sales process) to be considered a viable opportunity?
Most organizations use sales-qualified leads, as they are further in the sales funnel and are more likely to convert. However you define it, everyone must use the same definition so you can track the correct number of sales opportunities.
Deal size
The average deal size is calculated by dividing the total revenue generated in a given amount of time by the number of deals in that time period.
Because of their unique business model, most SaaS companies use the average customer lifetime value to represent the average deal size. The equation for customer lifetime value is:
While these metrics are not perfect—they don’t consider customer acquisition costs—they provide organizations with a consistent average.
Win rate
Also referred to as a conversion rate, your team’s win rate is the percentage of qualified leads that convert to paying customers during a specific period. To determine your average win rate, divide the number of sales by the number of opportunities during that period. Then, multiply that number by 100 to get the average win rate percentage.
When calculating the win rate, remember that depending on the sales cycle and the measured period, some deals that close in the measured period may have originated from a prior sales period and vice versa. When you understand this, you can accept that these discrepancies will even out over time or use a cohort analysis to measure win rate variables.
Length of sales cycle
Sales cycle length represents the number of days it takes for a lead to move through your sales pipeline and become a paying customer.
To calculate the length of your sales cycle, divide the total number of days it took to reach all deals by the total number of deals for that specific time period.
The shorter the sales cycle, the higher the sales velocity. But shorter doesn’t always mean better. For many big-ticket items, teams need to get buy-in from decision-makers, which can require follow-up. This will result in a longer sales cycle, but cutting corners to improve your sales velocity is not the right course of action.
Instead, focus on optimizing your sales process so that it takes only as long as necessary and not a minute longer.
Sales velocity formula
Now that you understand the four variables in sales velocity, it’s time to put them into the sales velocity equation. To determine sales velocity, multiply the first three factors (opportunities, deal size, and win rate) and divide the total by the length of your sales cycle.
Let’s take a look at the formula in action. A regional sales team had 3,500 opportunities across the team over the past 12 months. Their average deal size over the past 12 months was $12,000. Their win rate over the past 12 months was 19%, and the length of their sales cycle over the past 12 months was 112 days.
(3,500 x $12,000 x 0.19) / 112 = $71,250
This regional team generates an average of $71,250 daily or $26 million annually. The sales velocity formula makes it easy to track this important sales metric.
How to improve sales velocity
A higher sales velocity means that your business is making more money, so it stands to reason that most companies will look for ways to improve their sales velocity.
Thankfully, there are actionable steps you can take to improve your sales velocity, and they all center around the four main factors that go into the metric (opportunities, deal size, win rate, and length of sales cycle).
Increase your number of opportunities
If you want to increase your sales velocity, a great place to start is by finding ways to increase the number of leads that come through your pipeline. But before running ad campaigns or pumping out social media posts, remember that not all opportunities are created equal.
More leads coming in doesn’t mean much if the leads are poor quality.
Before you begin lead generation full steam ahead, ensure you have a well-researched ideal customer profile (ICP) and buyer personas ready to guide your efforts.
Once your ICP and buyer personas are in place, you can start generating more opportunities that still consider your lead qualification processes. You can send more cold pitches and make more cold calls; you can run ad campaigns; you can invest in marketing channels that work to bring in new customers.
One of the best ways to increase your number of opportunities is to tap into the connections you already have within your network. By examining the pre-existing connections between your business and other organizations, you can uncover warm introductions that are more qualified and more likely to lead to a sale.
With Affinity for Salesforce, finding these paths to warm introductions has never been easier. Relationship paths to opportunities are automatically displayed alongside deal-relevant data in your CRM, showing you how to drive higher-quality deals.
Improve your conversion rate
To optimize your conversion—or win—rate, you need to look at the effectiveness of your sales pipeline. Analyze your sales funnel and determine what is working and what isn’t working. What actions are helping prospective customers convert quickly? What roadblocks present that cause prospective customers to funnel out?
Your conversion rate can also indicate whether your leads are being qualified. A low conversion rate may mean that your leads aren’t qualified, so be sure to look at the conversion rate at each stage of your funnel and the overall rate.
When attempting to improve your conversion rate, consider sales strategies that help build customer relationships, like account planning. By understanding your customers’ needs, you can create a buying experience tailored to their business.
Increase your average deal value
When you raise your average deal value, your business will experience daily and monthly revenue growth. While it would be great if you could simply raise your prices across the board, in most cases, it’s not as easy as that.
Instead, you want to focus on value-based selling—instead of focusing on the product or service features you’re offering, you focus on the needs, challenges, and goals of your customers. It becomes about the unique value you can bring to potential customers.
The more you can speak to your customers’ needs, the more valuable your offer will be.
Once you have customers signed on, you can also spend time upselling and cross-selling to increase the average deal value.
Shorten your average sales cycle
The more efficient your sales team operates, the quicker they can close a sale. There are many ways to effectively shorten your sales cycle, including:
- Automating repetitive tasks like data entry frees sales reps to focus on revenue-driving tasks.
- Scheduling follow-up tasks within your CRM to stay at the top of your prospective customers’ minds.
- Being responsive to clients’ needs, challenges, and goals.
- Presenting a clear value proposition for your potential customers.
- Identifying decision-makers early on so you can get them on your side.
- Dealing with objections early on instead of letting them become more significant issues.
- Sourcing warm introductions through your organization’s network to contact new and existing customers.
Four sales velocity best practices
Sales velocity can have an immense impact on your business. Improving sales velocity can help increase revenue, efficiency, and customer satisfaction. When trying to build a sales strategy that incorporates sales velocity, keep the following best practices in mind to ensure all team members work towards improving sales velocity.
1. Focus on your sales efficiency
When you’re looking to improve your sales velocity, one of the first things you should consider is how to make your sales team more efficient. When teams are more efficient, sales cycles are shorter, deal sizes increase, and more qualified leads come into your sales pipeline.
Sales efficiency is a metric representing how much revenue a company generates for every dollar it spends to close a deal. Increasing sales efficiency saves the business money and increases sales velocity.
Consider the following methods to improve sales efficiency in your B2B sales team:
- Get clear on your buyer personas: When you have clear buyer personas that accurately represent your ideal customer, your sales team can confidently qualify leads and focus their efforts on the right prospects.
- Define and adhere to your sales process: When you have a straightforward sales process, sales reps can spend their time selling instead of focusing on other miscellaneous tasks. A recent Affinity survey found that 69% of sales leaders say their team spends over four hours a week updating their CRM.* Imagine what your team could do with those four hours if you automated CRM data entry. When you have a defined sales process that outlines exactly what sales reps need to do, you can streamline the process and allow your team to focus on driving the pipeline forward.
- Invest in sales training: Ongoing sales training and coaching can help sellers stay current on best practices and maximize their performance.
2. Establish consistent variables and definitions across your CRM
It is essential to keep your variables and definitions consistent in your CRM when calculating sales velocity. For example, what will be considered an opportunity for your business? Does it happen when they fill in a specific form, when they reach out via email, or when you reach out to them and qualify them?
There is not necessarily a wrong answer, but as an organization, you need to define these criteria early and keep them consistent throughout the process. This will also help ensure that all data that enters your CRM is clean and, therefore, useful.
3. Lengthen your analysis period
When setting the length of your analysis period, err on the side of setting a more extended analysis period. Measure the sales velocity of no shorter than quarterly and as much as six months to one year.
The longer period of time will allow you to account for variables like seasonality and longer deals.
4. Understand the impact of discounting
Discounts will not help you increase revenue, but if offered at the right time, they can help you close deals earlier. This can help you decrease the length of your sales cycle and positively affect sales velocity.
If you are considering discounts, ensure your sales reps are well-trained in how to use them effectively in your business. The goal should always be for the discount to benefit deals, not stunt business growth. Relying too heavily on discounts can negatively impact your bottom line and signal to some customers that you don’t value your product or service.
Improve your sales velocity with Affinity for Salesforce
The right tool can go a long way in helping you improve your sales velocity. With Affinity for Salesforce, you can streamline the sales process and save your sales reps time by automatically creating, updating, and enriching your CRM data. Additionally, Affinity for Salesforce uncovers more qualified opportunities by delivering valuable relationship insights that help sales teams find warm introductions to decision-makers.
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Sales velocity FAQs
Why is sales velocity important for sales teams?
Sales velocity is important for sales teams and businesses because it can help you understand how quickly you’re selling and generating revenue. As a metric, sales velocity provides valuable insights into your sales process and can highlight areas that need attention. When you understand sales velocity, you can make data-driven decisions to help accelerate sales in your business.
Can automation help improve sales velocity?
Automation can improve sales velocity by streamlining customer interactions. With the right automation tools, you can get tailored insights into how to approach certain customers. Affinity for Salesforce uses relationship intelligence to help enrich your data and uncover warm introductions to shorten the sale cycle, increase deal value, and increase opportunities.
Additionally, automation can save your sales reps time by automating repetitive tasks that take up much time. You can improve your sales velocity when your sales process is more efficient.
What metrics should you monitor to track sales velocity?
To track sales velocity, there are four main metrics you need to monitor:
- Number of opportunities — The number of opportunities/qualified leads that came in during a certain period of time.
- Length of sales cycle — The average length of time it takes for a prospect to become a paying customer.
- Win rate — The average conversion rate from prospects to paying customers.
- Deal size — On average, the amount of revenue generated from new customers.
You should also track your sales velocity as a metric. To calculate it, you can use the sales velocity formula and the above metrics.
What is the difference between a lead and an opportunity?
The difference between a lead and an opportunity lies in whether or not the prospect is qualified. Leads represent any potential customer—they could have come from marketing or sales outreach—but they are not qualified beyond that. Opportunities represent leads that have been qualified by the sales or marketing team and have a higher potential to become paying customers.
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