What is the Sales Velocity Equation?
The sales velocity equation 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.
If the sales velocity KPI is one that matters for your business, focus your efforts on optimizing one of the key variables at a time to maintain focus on how your activities are influencing a given outcome.
Number of Opportunities
Throwing more deals into the pipeline is a great approach as long as they fit your ICP, truly ready to buy, and in all ways are fully qualified. Otherwise you are creating sales velocity in a manner that will do more harm than good.
If you are looking to increase the number of opportunities, you need to ensure marketing and sales teams are working very closely to:
- Align on the definition of well qualified and your ICP.
- That marketing is focused not on volume of leads, but on the quality. This means changing their focus, and their compensation plan, to align with your new approaches.
- Ensure your inside sales team is fully trained to have effective conversations.
- Help your SDRs prioritize and customize their outreach efforts to personalize to each lead’s potential needs.
- Train your AEs to deeply understand the challenges your solutions solve for and arm them with customer testimonials to share with prospects.
Average Deal Size
Increasing your average deal size can happen in many ways, including raising the prices in your product catalog.
For organizations where this is not feasible, the common methods include:
- Upselling and cross-selling more licenses or more products/solutions respectively.
- Decreasing the amount of discounting.
Both of these can be influenced by better training and coaching your teams on how to run discovery as well as by teaching them how to have value-driven vs. feature-driven sales conversations.
Ensure that your Customer Success team are understand how to identify pain points your company can solve. Don’t turn them into sellers, teach them to identify the challenges and to bring in the sales leads to dig deeper.
This can often be one of the easiest methods for improving sales velocity.
Win Rate %
When you consider how to influence win rates, you need to think about the solution from multiple angles:
- Lead and Deal quality as was already discussed above under Number of Opportunities.
- In addition to the above, consider the fact that, on average, companies have much more success selling to existing customers vs. new prospects. How actively are you selling to this audience?
- The effectiveness of your conversations during the deal cycle. Do your sellers have a playbook to up-level the conversations sellers are having with prospects.
- Coaching and training of sellers leads to more practice which will increase how well they run the playbooks.
- Demo quality. Do the teams know your products well enough to run effective demos around the customer’s use cases vs. feature dumps.
Consider reading our article on improving win rates for additional ideas.
Average Deal Length
The majority of the recommendation to improve win rates will also lead to improvements in your average deal length which will improve overall sales velocity.
Note: Creating sales velocity the right way matters, let’s run some calculations and see how you are doing.
The Sales Velocity Equation Calculator
Catch the podcast on the Sales Velocity Equation[buzzsprout episode=’9162736′ player=’true’]
African 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.
The discussion, which you can listen to in the above audio player or back on YouTube, 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 (affiliate link). Creating sales velocity without awareness of the long-term impacts is not only short-sighted, but can be dangerous.
- 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.
Or, if you are in a hurry, read through the rest of this article.