Discussing the Sales Velocity FormulaIn this episode, Africa Regional Host Dave Nel joins Trust Enablement Customer Council Member Petek Hawkins and Greg Stockton, CEO of Prosperity, a Financial Planning firm in Dubai, to explore the Sales Velocity Equation.

What is the Sales Velocity Formula?

The formula measures how quickly you are bringing money in the door and is calculated by taking the product of the number of opportunities, deal value, and your current win rate and dividing that value by the average deal cycle length.

The discussion in this session raised exciting points for all of us to consider:

  • This formula is very short-term focused – or, as Simon Sinek would say, playing the Finite game.
  • Strategic, long-term companies should use this as one metric amongst all. You cannot play the infinite game and win if you only measure using finite game metrics.
  • To maximize sales velocity, you can see significant payback by influencing all of these values. However, most often, it’s best to focus on influencing one of these metrics as that singular focus will work best for most companies.

Give a listen and remain curious.

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Audio Transcript

Dave Nel
Right. So today we are super, super excited to have a world class panel of experts, I’d say on the call. And we’ve got protec, who is got significant experience in sales, sales leadership, and specifically at the moment in time where we find ourselves, I guess, sales enablement is your passion. And then on the other side of the world in Dubai, we have Greg, Greg, welcome. I know Greg is a avid salesman, a CEO, a business builder, and really just an all around superstar. And today, it’s it’s an exciting topic, because we’re here to talk a little bit about the concept of the sales velocity equation. And and just to get a little bit of a view from some experts around what that looks like and, and maybe share some some thoughts and ideas around it, what I wanted to do is just to start, because I don’t know if everybody knows necessarily what that sales velocity equation looks like, it’s just to go ahead quickly and, and show you a version of it. So let me just quickly put this into PowerPoint mo was there you go like that, is to give you guys a view of what it looks like. So here’s our sales velocity equation. And at the end of the day, what it really says is, there’s a way of thinking about the way or the speed at which we make money in a business. And it’s made up of, in general, four different parts, right, it’s the the number of opportunities that you’re bringing into the business, multiplied by the value of the deals that you bring in. So obviously, the larger they get the better multiplied by the wind rate. So you know, what is your your conversion ratio look like? But there’s also this thing underneath that sits at the bottom or your denominator, which is the length of the sales cycle? How long does it take you to close the deal? And I guess, overall, the concept is that if you change any one of these, you make money faster. And I guess ultimately, from a sales enablement perspective, you can change the wall, then you’ve got a massive multiplier effect. So that’s, that’s, that’s the sales velocity equation overall. But I wanted to hand over maybe, to protec. I know you have a couple of questions for for Greg and myself, and also some thoughts around this. Have you worked with this before? And have you found anything specifically around this interesting?

Petek Hawkins
Yeah, thanks, Dave, couple of things, just looking at this, um, it really depends on the maturity of the organization that you’re working with, I think where some of these things become more important for the time being, versus maybe less important. That’s, that’s one of the things that I wanted to touch on and get you in Greg’s opinion on how you feel about that, for example, I think when you have a fairly young organization, that is, you know, let’s take a look at startups that I’ve been a big part of, number one, focus becomes the number of opportunities early on, because it really is one of the things that maybe you have a very young sales organization that really don’t have the skills to drive the deal value, or don’t have the skills to impact the win rate quite a bit. That’s when you you know, manage to number of opportunities. The other thing as the as you see, organization more mature and up and get more skills, and maybe you have some sort of a methodology in place, then I really see the deal value and oven rate being impacted. Because instead of now you are being more of an order taker in a sense, I call those really young organizations more or order takers, then they move to an area where they are really driving the value to the prospect, educating them about the possible problems, and really being able to attach $1 amount or whatever currency amount that you want to do to that to that deal of value, and then also are able to instead of really, the instead of really following the lead of the prospect, they’re becoming now a guided person, that they are leading the conversation. So that’s when you see the run rates go higher. I’m curious about your opinion on this. What have you found out? Is that kind of similar to your findings, or do you have a different opinion? I would love to hear about them.

Dave Nel
Well, Greg’s run, started businesses run mature businesses sold businesses. So Greg, maybe I can ask you to comment on on what protec is saying.

Greg Stockton
Yeah, I mean, I think she’s definitely right. From a startup perspective. You know, it’s all about opportunities. And you know, whenever we get you guys into a business or whether it is a fairly new business, I always say there’s three things You really need to understand stats, stats and stats. And because it’s almost like, it’s almost like, it’s just like a really weird example, but almost like setting sail in a boat, right, you kind of know where you want to end up. But you don’t know the quickest way and the best way and the most efficient way to get there. So it’s like, if you start off with opportunities, and but all your deal values suck, if you go understand that to kind of go, it’s just gonna take a really long time to get where we need to be. So actually, by understanding the deal value means that you can then navigate that boat in a different direction. If all of a sudden you’re getting a really good deal of value, but it’s taking like, you know, six months of time to close a deal, you probably know you need to go a different direction. And so I actually think understanding each of those components is massively important just to almost understands the way the energy needs to flow,

Dave Nel
which I think is is a massively important thing for a start, and to fair for an established business as well to get into bad habits. But there’s a lot of energy wasted on things that actually are not making you money, and are not creating lifetime value for a client or not keeping a client interested in what other products you’ve got of a business. So yeah, understanding to start, which is huge. The import? Yeah, huge. And it’s funny you say the the mature business part of things, my experience has been that when everything is going well, and and you want to try and evolve or improve even more, just picking one of these areas can actually be detrimental? Because you say, how do we increase our opportunities exponentially? But actually, in a mature business, all you need to do is increase or decrease each of these by back? 10%? So how do we just shift up the number of opportunities? How do we just increase the deal size? How do we convert our conversion ratio and bring that in? If you change them all by 10%? What’s actually interesting is you make money 60% faster. So you know, it’s it’s not necessary. I think with a mature business, it’s hard to get people to make massive changes. So me sales enablement and sales leaders can say, how do we just tweak? How do we just move things ever so slightly, but it gives focus, I guess, at the end of the day?

Greg Stockton
Yeah. I think to get to the mature businesses as well, I think that obviously, the deal value is important. We often use the term kind of like sweat the asset, you know, your asset being all of your existing clients like have you got as much out of that, that base before you even looking at new opportunities. Now, I started working for a business two and a half years ago came in as a commercial director. And I looked at the client only had 115 million on the management. And literally, within three months, I just looked at the deal value changing one thing, I literally like one minute thing, it puts $6 million value a 6 million extra dollars on the valuation, literally within three months, just by looking at the value and what you’re getting out of those existing clients. I agree it is a slight tweak and make such a difference for sure. And

Petek Hawkins
yeah, on that note, I’m curious, like, you have different channels. And what I found out over the years is that actually different channels have different opportunities, not the opportunities that we’re seeing on the screen, but different opportunities for how they’re looking at opportunities do value, and then rate and the length of sale cycle. So while we’re doing that, I think it’s also important that if we are tweaking a couple of things at the same time, we’re very mindful of what that is. Because it’s I also found out for these things to be really successful, we really had to create a laser focus on one thing and make sure that we’re expecting that thing very clearly from that channel. But to your point, different channels could be doing a different playbook at the same time. And then when you see that velocity go, you know, skyrocket which is that kind of similar to what your findings are both of you.

Greg Stockton
Yeah, no, I I agree. I agree. I think you can, you can have, you can have multiple silos within a business, that you’re slightly tweaking. And as long as everyone knows the knock on effect of each one of those tweaks, you Yeah, you can you can go into the stratosphere with just small changes for sure. For established businesses. I think the new business is obviously slightly slightly different. But for the established

Dave Nel
ones, yeah, for sure. I also found that when you speak to, you know your execs, or your sales, your sales people, your sales coaches, your sales leaders, just this visual is incredibly helpful to create focus. And to say, look, at the end of the day, we’re here to make money as quickly as possible. And the place that we’ve identified, our biggest shift right now is win rates. And so the training, we’re going to do the coaching we’re going to do the focus that we’re going to give is really around here and the reason for that is if we can just change this by X percent. Look at Quickly, the left hand side or speed of making many changes. And a lot of times it just focuses the business around where exactly is our stretch? Right now? And Greg, I can see you want to say someday? What?

Greg Stockton
I’ll probably debate some of that as well. And I think there’s a lot of businesses that fail because they are purely so focused on making money. Now they forget about the sustainability of the business. Yeah. Yeah, they’re all like, okay, where are the opportunities, right, now, we need to reduce the length of sales. And then they forget about all the ancillary stuff that actually makes that business sustainable. You know, the things like looking after a client, analyzing, hey, what’s the lifetime value of this client? Are we getting one person because it’s a quick sale, but then we’ve got to look after him for 20 years, we’re going to make no more money, like to be one that kind of clients. So although I agree that, like the velocity is is important, especially to sort of give quick revenue and cash flow. I do think a lot of businesses and individuals that are single entrepreneurs, they forget about the sustainability of it, and then all of a sudden, you end up with a client bank, and then you can’t want it anymore. And then.

Dave Nel
So I guess one of the dangers is, I mean, it’s it’s a useful equation, but potentially, one of the dangers is, if you don’t look at it in context of the bigger picture, you could run yourself down the wrong path very quickly. Right. And, and not getting the actual results that you really want.

Greg Stockton
Yeah, 100% I mean, look, sales velocity is a is a is a part of a business, right? It’s not, it’s not the only thing, you have to look at the sustainability of everything that you do as well, like, I won’t take clients on in our business, because it’s gonna make us $20,000 this week, if I’ve got to look after that client for the next 10 years, and we’re not gonna be able to make any more money out of that. And it’s, it’s, it doesn’t make sense, right? You’ve got to look at the lifetime value of that client as well. And you’ve got to make sure that the business is capable of looking after, because this is a big thing, right? If you’re 100%, sales velocity, you’re taking clients out really quickly. But you’ve not got the IT infrastructure, the back office infrastructure and everything else to look after the those clients or those products or whatever it is that you’re doing, then everything falls down, right? Yeah, absolutely. Protect

Petek Hawkins
him. One of the things that’s interesting, just listening to you, too, is thinking about product led growth. So more and more companies, obviously, who can do this is moving towards the product, that growth. So this is really shifting this, I’m owning this specific velocity, really, sometimes from sales to customer success to Greg’s point, it’s the overall, you know, customer lifecycle, and who is really owning what part of that. So we kept saying sales, but it’s really expansion and growth to growth velocity, I can totally see this doing that, too. And I think at that point, just as much as sales, you have to think about customer success. And Greg, that goes back to like, who’s supporting this customer for 20 years? And like, is this the right group? are we bringing customers with product that growth? And then somebody else is growing that opportunity? I think they’re, you know, there’s something to be said about that, too. And I’m curious about when you look at this, how do you feel it fits in the customer success and of customer? growth part of the equation?

Greg Stockton
Yeah, I think I’m gonna be quite crude on this. To be honest, I actually think a lot of startups now don’t really care. I genuinely feel that way. Because I think if you go back, you know, 1520 years that the mark of a successful business generally is they say, you build something you took on clients, you manage it, and you might sell it in like 20 years time for 5 million or $6 million. Whereas now people want just as quick money, right? You do a startup, you bangalow the numbers and you collect all the data, and then you try and flip it in, like two years for $50 million. And I think what that does is it very much focuses people on a sales velocity, right? Those watches those, they have a quick win rate level. But actually, then it’s down to sell it and how somebody else saw the clients on the back end. It’s all numbers or data. And I think that’s the sad reality for a lot of startups at the moment. They’re so focused on just building out to do quick flips and sales, whereas that didn’t exist 1520 years ago.

Petek Hawkins
So where I would like to challenge you a little bit, I think in your classic sales, I think that is 100%. But when we say product, lead girls, which is you know, you have companies that make the initial point of entry really seamless, so it’s just like, enter your credit card. Now you’re in a company like Walmart, or big company, and then the deal there is like then who owns this right? It really just depends on the company, but sometimes They say, once an opportunity becomes an account that really goes to customer success. So it really is who’s owning this opportunities growth, because the real money is going to come from that initial contact point, how you actually grow that account. So that’s the only thing that I will challenge you is like, who is owning that growth? Is it the customer success? Or is it the sales? And depending on that, to your point, yes, like they only care businesses only care about that. But I think that product lead growth just brings a different level of complexity and how we need to think from an enablement standpoint, who are we enabling To do what? Absolutely, yeah,

Greg Stockton
no, I agree with that, to be fair, actually, is it’s fairly industry specific or product specific. But yeah, you’re right. There’s there’s no point taking on loads of clients, and then you can’t look after them. And they will leave in three months, right?

Dave Nel
It depends. It depends on the structure of the business. And like we said, at the beginning, the maturity of the business and where it’s at at that point in time. What is interesting, and I found that I’ve certainly seen companies do this is, you know, look, the reality is you grow your business in one of two ways. You either acquire new clients, or you take those existing clients that you have, and you increase your your share of wallet with them. Interestingly enough, for me, the sales velocity equation applies to both. So getting new clients on board is this equation. But when you’ve got existing ones, you still need to increase the number of opportunities that you have with them, you still need to increase your deal size with the existing ones, you still need to increase your win rate with your existing clients and shorten your sales cycle. So you could almost say, it’s on both sides of the coin. But it takes focus is the point, right? Otherwise, you end up running away with lots of acquisitions. And then like you’re saying Greg’s wonderful basket full of clients, that we never do anything with again, or can’t do anything with again. So

Greg Stockton
a great example of that Dave is, and I’ve worked with a few previously, as property companies, you say, Pam, golden, in South Africa, and I did some work with before I left. And as I Casey used, you sell a property for a client or you help a client buy one. But when when’s the next touch point with that client? Because you’re not making any money from that client, right? You’ve done a transaction, there’s no, there’s no recurring revenue, there’s nothing like that. So the next time there’s a touch point is when that client comes to sell the house, which might be 789 years down the line. So it’s really difficult to value property companies, whereas actually, if they thought outside the box, and when the hell were the other opportunities? Well, let’s partner with a wealth management firm, because lots of the people that buy multimillion dollar homes probably have other wealth that they can generate from this partner with this. And it’s amazing how many property companies don’t. And that’s why they’re so it’s all transactional, or so this sales velocity applies so much to them. But it doesn’t necessarily increase their valuation. Because they don’t have anything.

Dave Nel
Yeah. That’s an interesting point. And, and again, it’s just that perspective, right? Are we looking at existing clients? Are we looking at new clients? And I think just for for some of our listeners on here, we’ve got so many sales enablement practitioners on here. I think that before it feels like before you run down and create learning and programs and coaching around different parts of the sales velocity equation, this discussion that’s happening right now needs to happen in your business. First, where do we want to focus? Why do we want to focus there, not in isolation, not without the bigger picture context? Otherwise, what ends up happening again, is from an enablement perspective, we create a bunch of programs that actually focus on the wrong stuff, and create the wrong results that you’re looking for. So I don’t know if anyone has any comments in terms of what we would look for from coaches and, and enablement people when it comes to this equation.

Petek Hawkins
Totally. So Greg, I’m curious, when companies get evaluated for sales, you mentioned this, like they want to sell and they want to move on? That’s the majority of the businesses, right? Is there a part of this equation that matters more than the others that you’ve seen in this kind of a situation?

Greg Stockton
Yeah, I mean, I think it’s, it’s, I guess, it’s probably too far from a valuation perspective, obviously, you’re looking at a standard sort of cash flow model where you go, this is generating this much revenue, if we acquire it, this is what we can do. Whereas now, obviously, people are acquiring companies that have zero revenue, if anything that is just losing money hand over fist, right? But you look at the data, and then you look at Okay, well, what opportunities can we bring as a purchaser of that business that they’re currently not doing like that they’ve got they’ve gotten a no deal value, they’ve got no opportunities, but they have, you know, 5000 10,000 50,000 clients on their books that losing 2 billion, but quickly, if we implement our products, we can flip that turn it around. So yeah, that’s why data is just so important, right? And now it’s so easy to capture data, right? That’s where the big, big data conversation comes from. And so I think, yeah, obviously, you’ve got your typical revenue models, but actually, it’s more Where’s? Where are the opportunities within that business for us to go in? and exploit it really.

Dave Nel
I mean, I just reminds me, Look, you can have all the ideas in the world. But if you’re not capturing the data accurately, and able to report on it quickly, you know, you can’t do anything really. So I guess, again, make sure even as a startup, right, you’re collecting the right data, you’ve got it in the right spaces, so that people can take a look and see, Hey, where’s the opportunity?

Greg Stockton
Yeah, I mean, the way businesses are valued now, it’s just insane. To be fair, I mean, you know, again, you go back 20 years ago, it was very much, right, if your business is making money as a multiple of this, and that’s what we’re prepared to pay for it. Now your business is eager. Okay, the losing $2 billion a year, and it just had a valuation of 150 billion come from. So it’s all data and future potential of opportunities inside that data, right? What can you utilize that data for? It’s very, very interesting.

Petek Hawkins
Cool. So would you say, as enablement professionals, is there a certain part of skill set that we can focus on that really helps that company to be evaluated at one of those potential higher potential dollar values or whatever currency values that you want to look at? I keep saying dollars, sorry, because we’re in the US. But you know, I wonder if there’s anything because here’s the reason why I’m asking this, Greg. Um, usually what happens is that enablement is seen as a supporting role. And as such, it is really hard to say, oh, enablement is worth this to the company. But really, if you’re focusing on the right things, I think we can really make the impact of that evaluation go higher, because we can scale certain things. So in your opinion, I know that there’s not going to be like one size fits at all. But if you were to generalize, China is really dangerous, too. But if you could do that, what would you say? enablement folks can focus on that will help really derive the value of the organization immensely.

Greg Stockton
ecosystems. Tell me more about that. All right, if you if you’re looking at business right now, that does one thing, either, like, sells cars, and that’s the business that you go into, okay, what ecosystem so if you’ve got a car show, you’ve got a car manufacturer that’s caught my credit card sales for Salesforce, and that’s generating let’s say, $2 million of revenue a year. And you Okay, we want to really generate a bigger valuation. Okay, so what ecosystem can you build around that car showroom or that car business? Well, we could potentially have an arm of the business that does servicing of cars, we could have something that’s got nothing to do with cars, but a natural gravitation so we could have an insurance company on there, that does car insurance. So you can build businesses around your business to create an ecosystem whereby the valuation perspective, now you’re not just a car company, you’re looking at all the ancillary stuff that it does as well. So you go from being just a car company to a group that owns all of these businesses that naturally refer to each other. And all of a sudden, you address the total addressable market, which is really important, your time goes through the roof. So if you just sell cars, your total addressable market might be, I don’t know, 5 million people within your city. If you create an ecosystem, your total addressable market might now go to 20 million. So from a data perspective, your valuation is massively increased just by that capture. So I think ecosystem so where you can enable is looking at business and going right, what can we what can we do that makes sense for this company to also do a lot of people forget that. I love

Petek Hawkins
that. So you know, a build a platform and integrate that platform into multiple different shoots. And then as enablement, you are hearing the customer, you’re hearing the front line, so you can make those analysis and provide feedback. Hey, here’s an opportunity. I love that.

Dave Nel
Well, thank you to our two experts for today. We welcome I guess, people to reach out to either one of you if they’ve got questions about the sales velocity equation, or actually anything that we spoke about today. I think that both of you I know are our avid mentors, love thinking with people and learn by thinking with people. So I’m assuming that’s an open invite, if anyone wants to reach out to you guys on probably LinkedIn is probably the easiest place or make sure that you’re tagged in these videos. And yeah, well they leave it up to them to reach out to you if they’re looking for any additional advice.

Petek Hawkins
I would just add one more thing. Leave us all everybody. Dave is fantastic and he has helped me out throughout the throughout my enablement journey. So he’s also a super valuable asset you want to be definitely LinkedIn and

Dave Nel
who well thank you guys and enjoy the rest of your week.