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Want to supercharge your sales velocity?

Updated: Jul 4, 2023

TL ; DR


Sales velocity is the rate at which your open sales opportunities can potentially be converted into revenue. It's typically used as a leading indicator to drive future improvements in opportunity volume, deal size, win rate and sales cycle duration.


Calculate your sales velocity with this formula:


e.g.

Sales Velocity = (100 * £5,000 * 0.30) / 60 = £2,500 per day


This implies that we can generate revenue at a rate equivalent to £2,500 daily, for the duration of the sales cycle length, based on the 4 metrics above remaining consistent.


This is your starting point, the next steps are to devise strategies to increase your sales velocity, i.e., generate revenue faster, for each of the 4 metrics. For example let's assume a 15% decrease in the sales cycle length to 51 days (down from 60).


SV = (100 * 5000 * 0.30) / 51 = approximately £2,941 per day


Now we gain an additional ~17.5% just by reducing the sales cycle by 9 calendar days, and don't have to contend with price increase conversations, increase the number of open opportunities or improve our win rate.


Continuing reading for a deeper dive into how sales velocity is an effective metric to develop revenue growth strategies, processes and systems.

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The benefits of the sales velocity metric


As a CEO/Founder/VP of Sales of a growing SaaS company, although you are laser focused on revenue growth, sales velocity is probably a metric you don't focus on specifically, but one that you almost certainly monitor its underlying components.


Let's take a look at the definition, use cases and formula for sales velocity:


Sales velocity is the rate at which your open sales opportunities can potentially be converted into revenue. It's typically used as a leading indicator to drive future improvements in opportunity volume, deal size, win rate and sales cycle duration.


SV = (Number of open opportunities * average deal value * historical win rate) / historical sales cycle length


Ok, nothing new there, we already track all those component metrics, I here you say. Consider this however; the sales velocity metric gives you a holistic view, through one metric, on how your sales strategies, processes and systems are performing rather than a focus on individual component metrics that tell their own story but not how they relate to each other.


For example, how many times have you heard the mantra 'if we could just increase the average deal size by X then we could fix our revenue growth problem'? What this doesn't factor in is the impact on your win rate and sales cycle length, both of which could go in the wrong direction. Or what about strategies to increase open opportunities? Yes this is a strong strategy, but not if the quality of those opportunities starts to lower our average deal size.


Sales velocity as a metric can also feed into revenue forecasting giving you a better sense of resources needed and help with business planning and decision making.


It's often not possible to tackle each of the component metrics in parallel, you simply don't have the resources and bandwidth to do so. Sales velocity as a metric helps you to prioritise one component at a time and monitor the overall impact of the speed at which revenue could be generated


Review of each formula component:


Number of open opportunities: This represents the total number of potential deals or sales opportunities that are currently in your sales pipeline. You can further filter this number by the forecast category, for example you could filter on commit deals only or commit and upside deals only. The more strict you are on the filter, the tighter your overall metric because there should be a higher probability of commit deals closing than say those in the pipeline category.


Average deal value: This is the average revenue you expect to generate from each sale, which is derived by taking the sum of the revenue for the open opportunities and dividing it by the count of open opportunities.


Historical win rate: This is the ratio of sales opportunities that you successfully close. For example if you win 3 out of every 10 deals, your win rate is 30%. This metric incorporates your team's effectiveness in converting opportunities into actual sales.


Historical sales cycle length: This is the average time, in days, it takes for an opportunity to move through your sales pipeline and become a sale. This metric directly measures the speed of conversion from a lead into a client.


Example of a £2,500 per day sales velocity


Number of open opportunities = 100

Average deal value = £5,000

Historical win Rate = 30% (or 0.30 if expressed as a decimal)

Historical sales cycle length = 60 days


Sales Velocity = (100 * £5,000 * 0.30) / 60 = £2,500 per day


This implies that we can generate revenue at a rate equivalent to £2,500 daily, for the duration of the sales cycle length, based on the 4 metrics above remaining consistent. Note, if your business is highly unpredictable across the 4 metrics, then it will be reflected in the sales velocity measure, i.e. it too will be unpredictable and fluctuate each time you calculate it.


Understanding your Sales Velocity is essential as it provides a baseline against which you can track improvements in your sales process. The goal is to increase this value, either by increasing the number of opportunities, increasing the deal value, increasing the win rate, or decreasing the length of the sales cycle. Improving any of these factors will improve your Sales Velocity.


However, achieving a higher sales velocity is easier said than done, especially for early-stage businesses.


Let's run through two more examples, using the baseline of £2,500 per day as a starting point for our sales velocity (SV). To improve our SV, we decide to deploy a strategy of pricing increases that will boost the average value of the deal sizes by £1,000 to £6,000 on average (i.e, a 20% increase on £5,000). However, it's expected that deals will take a little longer to close and that the average sales cycle length will increase by 15% to 69 days.


Running this through our formula:


SV = (100 * 6000 * 0.30) / 69 = approximately £2,609 per day


Whilst this is clearly an improvement over £2,500, it's only a ~4% increase for a 20% increase in pricing and we also know that price increases are likely to effect our close rate too so the improvement could drop further. Overall, this doesn't look like a great strategy in isolation.


What if we deploy strategies that reduced our sales cycle length and leave prices as they are? We can go into the detail of what these strategies would look like later, but for now, let's assume a 15% decrease in the sales cycle length to 51 days (down from 60).


SV = (100 * 5000 * 0.30) / 51 = approximately £2,941 per day


Now we gain an additional ~17.5% just by reducing the sales cycle by 9 calendar days, and don't have to contend with price increase conversations.


At this point, it should be clear that reducing our sales cycle and keeping everything else constant can deliver an improvement. But how do we do that?


An experienced sales and marketing consultant can help early-stage businesses, such as SaaS seed, start-ups, and scale-ups, create a predictable revenue growth framework that is tailored to their specific needs (e.g., how to reduce our sales cycle length, how to generate more leads so we can create more opportunities, how to price our offers, how to boost the win rate and dozens more).


They can work with you to identify the right target audience (your ideal client profile and buying personas) so that you are working on high probability opportunities. Develop effective messaging (aka as your value proposition) that demonstrates the value you can deliver, and partner with you to build a framework that is designed to predictably convert prospects into clients.


Developing the right qualification, discovery, and solution playbooks is another area where a sales consultant can be invaluable. These playbooks are essential for guiding the sales team through the sales process and ensuring that each prospect is properly qualified and engaged. A sales consultant can help develop playbooks that are customised to the business's needs, and can be updated as the business grows and evolves.


Additionally, an experienced sales consultant can help businesses build a high-performance sales team. They can assist in recruiting top talent, provide training and coaching, and establish performance metrics to ensure the team is working efficiently and effectively.


Finally, an experienced sales consultant can coach businesses on how to close more deals of higher value. They can help identify areas for improvement in the sales process, provide feedback and guidance, and assist in negotiating and closing deals.


In summary, if you're an early-stage business looking to supercharge your sales velocity, hiring an experienced sales consultant is an excellent investment. They can help create a go-to-market strategy, build a high-performance sales team, develop effective playbooks, and coach you on how to close more deals of higher value. With their help, your business can achieve a high sales velocity and grow and succeed in today's competitive market.

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