B2B sales reps are always looking for a speed boost. They want to bring in that extra quota-breaching deal before the end of the quarter, get into the kickers, and claim that big commission check.
Rightfully so — doing sales is hard work. They deserve it.
Still, how do they figure out their selling speed and figure out what’s holding it back? That metric is called sales velocity.
If you understand this metric, you can identify hold-ups in your sales process that might be causing you to generate revenue at a slower pace than you’d like.
If you can improve it, you will be closing deals more quickly.
Even better, you will have more time on your hands. That way, you will be able to add a few more accounts into your pipeline, allowing you to close more revenue in total.
So, let’s go over how to calculate your sales velocity and how to improve it by tweaking one or all of the 4 sales factors that comprise it.
What Is Sales Velocity?
Sales velocity is a measurement of how quickly deals move through your sales cycle and begin generating revenue. It measures the rate at which you turn prospects into paying customers.
Sales velocity is represented as a dollar amount. For example, a sales velocity could be $4000 per month per rep.
A company with a sales velocity of 4000$ can expect its sales reps to bring in that much revenue every month.
And it isn’t a vanity metric.
Sales velocity reflects the overall health, potential for growth, and effectiveness of any given business.
The result also provides insights into parts of the sales process that need tweaking to meet revenue goals. For instance, perhaps the reps need to focus more time on larger accounts or generate more high-quality leads.
Understanding this metric is critical. To access its benefits, you must first know how to calculate it.
How to Calculate Sales Velocity?
The sales velocity equation consists of 4 sales metrics:
- Number of opportunities: The number of deals across all stages of your pipeline over the time frame being measured.
- Average deal size: The number of deals in your pipeline divided by the total dollar amount of all of those deals.
- Conversion rate: The percentage of leads that turn into customers.
- Average sales cycle length: The average number of days it takes to close a deal.
Sales velocity = (number of opportunities x average deal size x conversion rate) / average sales cycle length.
After you have gathered all of the numbers, it’s time to plug them into the sales velocity equation:
To illustrate how different inputs produce different outcomes, let’s go through a few examples.
Let’s say your business gets an average of 100 sales opportunities a month. Your conversion rate is 15%, i.e., (.15), and your average deal size is $1,000. Lastly, on average, it takes your leads 20 days to convert.
Let’s plug it into the equation.
(100 x $1,000 x .15) / 20 = $750
With these numbers, your sales velocity would be $750 a day. That is roughly how much revenue your company generates each day.
If you wanted to calculate it by month, you would swap out 20 days for around .67, or ⅔ of a month. Then you’d have a sales velocity of around $22,500 per month.
To increase your sales velocity, you need to raise one or more of those metrics in the equation.
For instance, you could improve your lead generation tactics and find more highly qualified leads.
That would raise both your number of opportunities, and might even increase your conversion rate. Higher quality opportunities are easier to close.
So, going with the example, perhaps your number of opportunities will rise to 200 and your conversion rate will be .25. Now, let’s find your new and improved sales velocity.
(200 x $1,000 x .25) / 20 = $2500 per day.
Upgrading your opportunity generation methods more than tripled your hypothetical sales velocity. Go grab some chocolate and celebrate your fictional success.
Pro Tip: Here is a sales velocity calculator. All you have to do is plug in your numbers. Then, you can play around with the numbers to figure out where in your sales process you should invest your resources to maximize sales velocity.
Now, go and find your sales velocity!
Why Is Sales Velocity Such an Important Metric?
Understanding your sales velocity is crucial to figuring out how your sales team can improve scalability and maximize revenue.
Here are 3 reasons why measuring sales velocity is so critical.
1) You Will Know Where You Stand
The sales velocity metric is revealing. So much so that it can act as a standalone metric for your business’s success.
For instance, if your sales velocity is higher this month than last month, that means you are generating revenue more quickly than before.
That’s an indication your business processes are improving and that your company is heading in the right direction.
2) You Can Set More Accurate Quotas and Targets
The sales velocity metric can help you create your sales plan and set the related goals.
If you are a manager, it gives you a view of how much new business your sales reps can realistically generate over a certain period of time.
Moreover, it will help you find the golden balance of large and small deals that your sales reps should be managing at any given time.
3) You Will Spot Areas for Improvement in Your Process
Understanding the speed at which accounts move through the pipeline will help you spot areas for improvement. You can do this through AB testing.
Perhaps one segment of your sales team is focusing only on prospecting marketing-qualified leads (MQLs), while another, in an attempt to find more opportunities, is also reaching out to cold leads.
It turns out the first group has a higher sales velocity. That informs you that the second group should stop contacting leads that aren’t a great fit, and focus only on those that are.
The Four Factors of Sales Velocity
If you are going to improve your sales velocity, you have to focus on one of the four factors that make up the equation. For instance, you might try to increase the number of opportunities or shorten the length of your sales cycle.
Before you make any tweaks, let’s go over each factor that influences your sales velocity.
1. The Number of Opportunities
The number of opportunities refers to how many qualified leads your sales team manages over a given period of time.
An opportunity is only considered valid when the account or contact has been qualified.
Qualification requirements differ across companies. Nevertheless, most want leads that are interested in the product and have the ability to buy it.
To emphasize this point about what counts as an opportunity, a lead who has filled out a marketing form and awaits a call is still not qualified. Therefore, there is no opportunity with that lead, at least not until the salesperson calls and qualifies them.
The more opportunities your sales team has, the more chances they have to close a deal. They get more at-bats. So, increasing the number of opportunities is usually a good idea.
There are 3 main ways to increase the number of opportunities in your sales reps’ pipelines.
- Do more prospecting: More outbound lead generation tactics, cold calls, cold emails, etc.
- Increase marketing efforts: Improve SEO, content marketing, and other lead magnets.
- Get more referrals. Invest time in building relationships with customers so you can ask them for referrals.
Which tactic you choose to emphasize depends on the type of business you run and your client base.
Also, if you want to parse this metric out a bit, you can filter the number of opportunities generated by individual sales reps, or within a specific region.
That way, you can see which rep’s or team’s methods are producing more opportunities compared to others.
2. Average Deal Size
This metric is self-explanatory. The average deal size is the average dollar amount of your closed deals.
If you close 100 deals and the total new revenue from them was $10,000, your average deal size is $100.
This metric doesn’t say anything about the variance of your deal sizes. In the above example, some of the deals could be $1, and others could be $1000.
However, it does tell you the average amount of revenue you generate from each close, allowing you to accurately predict future revenue and calculate metrics like sales velocity.
Now, if your company uses subscription-based pricing usually found in SaaS, swap average deal size out for average customer lifetime value.
3. Conversion Rate
How many of your sales opportunities end up becoming customers that generate revenue? The answer lies in your conversion rate.
If you have 50 qualified leads — also called opportunities— in your pipeline, and 10 of them result in a sale, you have a 20% conversation rate. Not too shabby.
In fact, it is much higher than the B2B sales average conversion rate of 6%.
Remember, this is from opportunity to close. The lead was already qualified. Because of this, you’d expect this opportunity to close rate to be higher than the leads to opportunity rate, but that isn’t the case.
The average conversion rate from unqualified leads to opportunities is much higher, sitting at 13%.
That means that sales reps are having more success getting cold leads interested in exploring the solution than they are at getting already interested leads to buy the solution. Why is that?
Why’s that? Probably not because they are better at cold calling than closing.
Perhaps they are investing more time into this first conversion.
Or, equally likely, sales reps are stacking their pipelines with sub-par leads that don’t close. To meet pipeline metrics, and satisfy their managers during meetings, they might be qualifying leads who, well, really aren’t qualified at all.
Maybe the leads aren’t decision-makers, or maybe they work at types of companies that never buy this solution.
Whatever the reason for the discrepancy, it is important to improve your sales tactics and processes to increase your opportunity to close the conversion rate and, therefore, your sales velocity.
4. Length of the Sales Cycle
How long does it take the average sales rep to close a qualified lead? 10 days? 20 days? The B2B average is 18 days.
But remember, that is from qualification to close, not from initial unanswered cold call to close. From prospecting to close takes an average of 84 days.
To calculate sales cycle length, we are concerned with the former — from qualification to close.
This sales cycle length depends on a number of factors:
- The number of steps in your sales cycle.
- How long each step takes on average.
- The complexity of your solution.
- How many decision-makers are usually involved.
- The cost of your product or service.
For reference, sales cycles tend to be longer in complex and high-cost sales.
It makes sense. People want to do their due diligence before making an expensive purchase that will be tough to implement across their team.
This is the one sales velocity factor that you want to decrease. To do so, you can offer discounts, improve your sales processes, or, as always, find higher-quality leads.
How To Maximize Your Sales Velocity
To improve your sales velocity, you can increase your deal size, number of opportunities, and conversation rates, or, you can decrease your sales cycle length.
Better yet, you can take actions that make beneficial shifts in each metric, such as upgrading your lead-generation strategy.
That said, here are some of the best practices for maximizing your sales velocity.
Start With Having More Leads
The more quality leads you have in your pipeline, the more chances you have to close deals. Keep in mind, the keyword here is quality.
You don’t want a pipeline filled with flaky window-shoppers. You want one packed in tight with a hungry crowd, made up of prospects who truly need your service.
These will be the decision-makers and accounts that fit your ideal customer profile (ICP): a description of the customers that receive the most value from your solution.
So, first things first: create an ideal customer profile that enables you to assess the quality of leads.
Then, use a lead generation technique that provides you with these types of leads.
That could be through your own online research. For instance, if you were selling property management software, you could look through industry associations for the property management companies that fit your ICP.
You could also automate the process with a lead generation tool like Soleadify, which gives you lists of ICP-matching leads for your team to reach out to.
You could also try other lead generation tactics, such as social selling.
With this method, you use social media to connect with decision-makers in your industry, interact with them, and provide them value.
If all goes well, you will find a pain point that you can solve with your solution.
And who knows, if you are on their radar, they might reach out to you if they realize they need help with something your business handles.
Having more high-quality leads to talk to is one of the most effective ways to boost your sales velocity.
Increase Your Deal Size
If you want to increase your average deal size, start by offering add-ons to current products. This will raise the overall price.
Moreover, if the prospect was already interested in buying, a 10% increase for a useful additional feature or service shouldn’t scare them off. They can always just say no and stick to the original product.
You could also systemize this tactic a bit by building a tiered pricing strategy.
Most buyers will go with your middle, or basic, offering.
However, your ideal customers, the ones who really need your help, and who are confident in this need, will buy your premium option. This option will give you and them the best ROI.
This tactic works well for SaaS brands and agencies.
For example, for agencies, a basic package could be an SEO audit, a content marketing strategy, and article creation. A premium package could include something extra — like promoting the content, or e-books and case study creation.
Another method, a pretty obvious one, is diverting your attention to larger accounts in your market.
For instance, you could spend your time going after businesses with 100 employees instead of those with 10 employees. The larger businesses will probably pay more.
Lastly, you could try cross-selling. During the sales process, you mention and sell different product lines that might also fit your prospects’ needs.
To cross-sell most effectively, you need to discover what other products your customer might want.
Do this by taking a consultative approach to selling, and by listening attentively for other ways you can help.
You can also ask prospects a lot of questions about their business. That will help you locate the gaps that another product line can fill.
Improve Your Conversion Rates
There is no silver bullet to winning more of your deals. However, there are always ways to enhance your selling abilities. The first place to start has to do with your leads.
Locate and prioritize leads that match your ideal customer profile, show serious interest in your solution, or are referred to you by a current client.
That way you will spend more time working on accounts that actually need your product, rather than ones that view it as a nice-to-have.
The better the lead, the higher your chance of closing them.
You can also improve your sales skills by learning well-tested closing techniques or newer sales strategies, such as soft selling — a sales approach where the sales rep prioritizes building relationships and making their prospects feel comfortable throughout the sales process.
Soft selling should increase your conversion rate, especially if you sell a complex SaaS solution that buyers really need time to think over.
Keep in mind that since you are encouraging them to take their time, the sales cycle length will probably increase.
Depending on which metric change outweighs the other, your short-term sales velocity could either rise or fall.
However, building relationships is usually worth a slightly longer sales cycle.
These customers become clients for life and end up increasing your sales velocity in the long-run by coming to you for upsells, or by referring potential clients to your company.
Shorten Your Sales Cycle
The best way to shorten your sales cycle is by spotting and removing bottlenecks in your sales process.
For example, maybe opportunities keep getting clogged up in the pricing stage.
If that’s the case, you can fix this by either adjusting your pricing strategy or by training your sales on demonstrating the ROI or value of the solution during their presentations.
If deals are stalling in the discovery phase, you could attend sales reps’ calls and listen to figure out if they are asking the right questions.
No sales process is flawless, so study yours and find something to improve.
Also, try giving your reps some reinforcements. Consider hiring sales development representatives that will only work on generating new opportunities.
Then, your more experienced sales reps can work on converting those accounts, thereby focusing only on selling to qualified buyers.
This will result in faster closing deals since each prospect gets more touches during their journey through the pipeline.
These follow-ups are so critical.
Sometimes sales cycles drag on simply because the prospect is too distracted by other work and forgot to sign the contract. In that case, a few phone calls and a quick contract walk-through could be all you need to seal the deal.
Lastly, if your prospects are indecisive because of uncertainty about whether your product will work how they want it to, you can offer a free trial.
Seeing it in action should evaporate any reluctance, and they should be more willing to sign the dotted line.
It’s All About Small Improvements
Sales velocity is a great way to measure the overall vitality of your sales team and your business.
If it’s trending upwards, pat yourself on the back. Your sales strategies and tactics are working.
If the velocity is stalling or shrinking, don’t panic.
Take some time to really dig into the results. And try implementing some of the above tactics to improve upon one of the four influencing factors: number of opportunities, deal size, conversion rate, and the length of the sales cycle.
Half the battle is just analyzing the different factors.
Take small steps each month to improve them, and you will consistently put more distance between you and the one competitor that truly matters: your past self.
You will be on your way to a sales velocity that takes you to the top.