As a sales leader, it is necessary to understand the performance levers which impact your bottom line. One encompassing metric that can help you understand these levers and improve sales effectiveness and efficiency in 2021 is Sales Velocity. Deciphering your Sales Velocity can help you as a sales leader evaluate your pipeline, understand your bottlenecks, and address any potential gaps to best practice. In this post, I will take you through the variables used to calculate Sales Velocity and show you how you can use each to drive more revenue through your pipeline at a faster rate. Download our Sales Velocity Tool to understand where the gaps are in your business.
What Is Sales Velocity?
Sales Velocity is a measurement of the rate at which your company makes money. Put more simply: if normal velocity is “miles-per-hour,” you can think of Sales Velocity as “money-per-month.” To calculate Sales Velocity, you’ll need to understand the number of leads in your pipeline, average deal size, conversion or win-rate, and average sales cycle length. To make your analysis more detailed, you can gather these metrics by region or by business unit. The calculation for this metric is simple:
Number of Active Leads * Average Deal Size * Win-Rate
Sales Cycle Length
How Can Sales Velocity Help Us Understand Our Gaps to Best Practice?
Sales Velocity can be used to internally benchmark different business units or regions. Understanding how the individual KPIs used in the calculation affect the outcome will help determine where your bottleneck is.
To increase Sales Velocity, we can increase the number of converted leads, increase the average deal size, or decrease the sales cycle length.
Perhaps with a particular region, you see strong deal sizes and conversion rates, but your top of the funnel activity is low. This would point you towards focusing more resources on your marketing strategy to generate new and additional leads. On the other hand, if your funnel and conversion rates are good but your average deal size is low, you might undertake an Account Segmentation exercises to find your highest potential accounts and target them more effectively.
Let’s talk through some of the ways we can address each of these inputs to increase Sales Velocity.
# of Converted Leads: You can improve your number of converted leads through several efforts. First, ensure that your marketing team is finding, targeting, and nurturing sales-ready leads. Improving top of the funnel pipeline without bringing in high-quality leads will not be enough to improve Sales Velocity. Second, to guarantee your team is converting on your leads, develop a lead scoring system to create alignment between sales and marketing. Aligning around a system to define, qualify, and nurture leads will ensure your front-line reps have prospects that are a good customer fit and are ready to buy.
Average Deal Size: Utilize an account segmentation exercise to increase your average deal size by focusing on the right accounts and properly segmenting your customer base to understand your ideal customer profile. A properly conducted account segmentation will allow you to identify high-value opportunities within your ICP and focus on the accounts where you’re more likely to win. Additionally, an account segmentation will identify key up-sell and cross-sell opportunities and create bundled solutions that add value to your customers and increase your average deal size.
Sales Cycle Length: Win deals faster by overhauling your sales process by bringing the right information to the customer at the correct time. To move deals through the pipeline faster, develop clear sales stages that are detailed and based on your customers’ buying cycle. Additionally, have defined exit criteria which can help you disqualify low quality leads quicker and identify any potential bottlenecks in your selling process.
Utilize SBI’s Sales Velocity Tool to determine where your gaps to best practice are in your Sales Velocity by analyzing your pipeline, win-rates, deal size, and sales cycle length by region or business unit. By addressing each of these metrics, you can build an efficient and fast-moving pipeline to revenue machine.
Want to know more about your company’s Go-To-Market maturity? The Revenue Growth Maturity Model is an assessment developed by SBI to help companies identify key risks to their revenue growth.
The 7-minute exercise will pinpoint your company’s strengths and gaps in these areas:
- Revenue Growth Strategy
- Revenue Marketing
- Pricing & Packaging
- Customer Experience
- Customer Success
Given your score, the RGMM will identify actionable insights that you can begin implementing immediately. As you climb the ranks of the maturity model over time, you will see lower customer acquisition cost, higher customer lifetime value, and more predictable growth attainment.
Where do you currently rank on the RGMM?