Sales velocity: what it means and how to measure it
Time is incredibly valuable to any sales organization. The ability to convert potential clients into real revenue streams hinges upon many factors; but the faster a deal closes, the more money the sales organization actually makes.
Pushy sales tactics and overly-aggressive strategies wont help sellers close their deals any faster, though. Salespeople must find more effective methods for managing a larger pool of buyer stakeholders and mitigating the challenges of increasingly long sales cycles.
To increase the speed of deals, sales teams need a deep understanding of weak spots in the sales pipeline. By calculating sales velocity, sales teams can more easily pinpoint those weak spots. A thorough understanding of sales velocity can help teams ensure consistent, maximized income over the course of a quarter and beyond.
Below, well discuss all things sales velocity, including how to calculate velocity, why its so essential, and how teams can increase sales velocity to close more deals at faster rate.
What is sales velocity?
Sales velocity measures the rate at which winning deals flow from start to finish through the sales cycle from new deal creation to closed-won. Sometimes referred to as pipeline velocity or deal velocity, sales velocity is a key metric that impacts the accuracy of your sales forecasts.
Proper forecasting requires consistent, precise estimates around how much and how quickly products and services will sell; and accurate sales velocity measurements can contribute to more predictable revenue and budget distribution decisions.
Sales velocity is also particularly valuable when evaluating seller productivity and identifying areas in the sales process that need improving. By calculating sales velocity over time, sales teams can move customers through the sales cycle with greater efficiency and speed.
The sales velocity formula
The foundation for proper sales velocity measurements is a well-established pipeline. Ideally, you already have the right tools to adequately track and manage your pipeline, and should be able to easily gather the components you need to calculate sales velocity.
The sales velocity formula is as follows:
V = [# x $ x %] L
Sales velocity (V) = [Number of Opportunities (#) x Deal Value ($) x Win Rate (%) ➗Sales Cycle Length (L)
Lets take a closer look at each of the formulas four major components:
Number of opportunities (#)
Your number of opportunities refers to the total number of fully qualified leads in your pipeline. Keep in mind, while 61% of B2B marketers send all leads directly to sales, only 21% are actually qualified.
Its vital to the accuracy of your sales velocity that you use the number of opportunities that have made it through the qualification process. Low-quality leads arent going to make a purchase anyway, so including them in the calculation only unnecessarily hurts your measurement.
Deal value ($)
Deal value, or the size/value of the purchase, is dependent upon a couple of key factors. If your organization sells individual products or services at a set price, its best to use the specific purchase amount of each of those products or services. If your organization uses a different pricing model (e.g. product bundles), instead use the average purchase amount to calculate deal value.
Win rate (%)
To calculate win rate, divide the number of closed-won deals by the number of opportunities created during that same time frame. Remember: Its important to use the number of qualified leads when calculating this number, as low-quality leads will muddy the waters and tank your win rate percentage.
Sales cycle length (L)
Your teams average sales cycle length is the time it takes for a qualified lead to become an actual purchasing customer. To gain a clearer picture of sales velocity that accurately reflects the health and productivity of your sellers, make sure you use the most up-to-date data possible.
This is a tedious, time-consuming process if you dont have the right tools for support; and inadequate tools often also mean outdated, incomplete data. To instantly calculate sales velocity based on the best information possible, you need a system that connects all your essential data in real-time.
Why is it important to understand sales velocity?
Its no secret that the sales cycle has increased in complexity. In fact, in the B2B sales world, the typical buying group for a single solution can involve 6 to 10 decision makers. Each stakeholder brings to the table unique priorities, objectives, perspectives, personalities, and objections. As more buyers enter the picture at different points in the sales cycle, sellers often struggle to get everyone on the same page, stalling the deal.
Strategies to improve sales velocity requires sellers to manage their pipeline more efficiently. When combined with other strategies to fine-tune the sales process (like identifying the right decision makers, negotiating with confidence, and investing in the right salestech), measuring and increasing sales velocity contributes to a shorter sales cycle and boosted revenue.
What is a sales velocity report?
A sales velocity report is a visual representation of sales velocity. Theyre beneficial to individual sellers looking to improve their own performance, as well as sales teams attempting to course-correct and refine broader sales processes, work flows, pipeline stages, and more.
For example, a sales manager might calculate sales velocity of their teams deals throughout a certain period and use that data to generate a report. That report can help the manager pinpoint potential weak spots, then make meaningful improvements to increase sales pipeline efficiency.
Lets say the sales manager wants to dig into whats contributing to their teams success (and shortcomings) within the last three months. Using a sales execution platform, the manager can easily calculate sales velocity across that time period, then build a report that breaks down not only the four key factors used in the calculation, but also the sales activities associated with each and how buyers have responded.
Based on those insights, the sales manager can help sellers replicate high-performing strategies and drive pipeline growth while reducing the time it takes to close deals.
How to increase your sales velocity
Improving the factors that contribute to greater sales velocity doesnt have to be a shot in the dark. There are several best practices that can leverage to start boosting those numbers and closing more deals at a speedier pace.
Apply intelligence at every stage
From opportunity creation to deal close, intelligent tools can help your team deliver on their goals. Sales intelligence software helps teams collect, consolidate, and analyze data from various sources to gain a clearer picture of their workflows, prospects, and the revenue cycle as a whole.
Sales intelligence is particularly valuable for improving the factors that impact sales velocity, like lead qualification. Some platforms surface insights around interactions between buyers and sellers, allowing sales teams to monitor and decode engagement and buying signals that indicate interest (or lack thereof).
The result is a more seamless, accurate process for qualifying and engaging with leads, as well as understanding exactly when sellers should take action. Sellers can also use those insights to more easily recognize low-quality leads thatll never convert, and shift their attention to engaging with those that will.
Consolidate disjointed point solutions
To truly understand all the details associated with deals in your pipeline, your team needs a single, centralized view. If they still rely on outdated, disjointed sales tools to determine whats going to close, theyll miss out on the vital, real-time data required to determine whats going to close.
Modern, centralized sales technology gives sellers a complete, unobstructed view into up-to-date pipeline and deal details. They offer advanced visual representations to help teams identify the optimal velocity for each type of customer or product alongside revenue efficiency. With transparent, detailed visualizations of connected, up-to-date data across the pipeline, salespeople can streamline their sales cycles and close higher-value deals at a faster rate.
Make sure the tool you choose helps you build and manage a clean, high-quality pipeline without spending hours digging for information. Sellers should be able to easily pinpoint and purge prospects that have been stuck at certain stages and wont budge so they can spend more time on higher-value leads that are more likely to close.
Correct at-risk deals
Spotting at-risk deals early enough to intervene and act with urgency is crucial to increasing your teams average win rate. When deals stall out in the eleventh hour, sellers are typically frantic wasting even more precious time trying to salvage the deal.
To improve the health of deals before its too late, sellers need sophisticated tools that act as a warning system for increased deal risk. The right technology can instantly pinpoint these risks, so salespeople no longer have to rely on the gut instinct that all-to-often leads to surprising losses.
Sellers can then prioritize those at-risk, high-value deals and managers can use data-driven insights to coach them on the right actions to move deals forward. The whole team has total visibility into the health, status, and next steps of each deal, allowing them to focus on boosting their win rates.
Use mutual action plans
Buying is often a complex, lengthy process; and one that can cause buyers to delay their decision or disengage altogether. In fact, in a recent Gartner survey of B2B buyers, 77% rated their latest purchase experience as extremely complex or difficult.
To bolster a strong partnership that helps sellers anticipate and address customer pain points, sales teams must first learn which stakeholders are engaged in the buying process. Then, using a single tool to set goals, criteria, and timelines, sellers should collaborate with all stakeholders throughout the deal.
Mutual action plans (MAPs) enable sellers to do just that. MAPs are documents that salespeople develop in partnership with buyers to ensure alignment of critical steps, milestones, and deadlines required to complete the buying process. They enhance visibility for both parties to reduce frustration and uncertainty, whichin turnhelps to shorten the sales cycle.
Outreach offers built-in mutual action plans as a capability that acts as a central hub throughout the entire deal lifecycle. They provide an integrated, collaborative buying experience that instills buyer trust and mutual understanding in customers for a faster close.
Boost sales velocity with Outreach
Increasing sales velocity is an essential task for teams looking to optimize deal-closing consistency and revenue. But point solutions and strategies based on gut instinct wont provide sales teams with the deep understanding needed to detect and resolve weak spots in pipeline.
While the methods above can certainly improve your teams sales velocity, none of them are easy levers to pull. To get at the root cause, you need to increase seller productivity. That means equipping reps with the digital selling skills required to meet modern buying preferences. Armed with those skills (and powerful tools for support), sellers can source more opportunities, identify bigger deals, and close more often.
Outreach is the only company that provides a complete, all-in-one sales execution platform for evaluating and executing selling activities and unlocking rep productivity across the entire sales cycle. With tools for early risk identification and intervention, Outreach helps sales teams accelerate deal velocity and increase pipeline conversion.