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What if I questioned you about if you ever pressed your interviewer on their sales tempo? If your response was “Yes” the second time, you already grasp the significance of this formula in determining the development mindset and general health of a sales organization.

If you haven’t given a company’s sales velocity any thought, now is the time to do so. Go beyond KPIs to wow your manager or potential manager when you next meet. What is sales velocity then? Let’s see…

Sales Velocity

Sales velocity is a gauge of how rapidly your company is turning a profit. It examines the rate at which deals pass through your sales pipeline and produce income. The calculation of sales velocity reveals to organizations how much revenue they can anticipate in a day or during a specific time period.

Why Is Tracking Sales Velocity Important?

The sales velocity of your team immediately reflects a company’s health and capacity for growth.

You’ll have a better sales velocity if you’re successfully turning leads into closed transactions as they move through your sales pipeline. The better the sales, the quicker.

Anyone who works in sales, though, is aware of the lengthy process involved in convincing clients to say “yes”. Teams can identify which sales process phases are effective and which ones are driving consumers away by understanding the rate at which people move through their pipeline.

Also Read: Full-Guide About Digital Sales Channels

The 4 Factors of Sales Velocity

The number of prospects in the pipeline, the average deal size, the frequency with which reps close winning transactions, and the length of your sales cycle are the four main variables that are taken into consideration when calculating sales velocity.

You may assess sales velocity using these four measures, track changes over time, and uncover strategies to speed up your sales process by doing so.

• Number of opportunities
• Average deal size
• Conversion rate
• Average sales cycle length

Number Of Opportunities

You will have a fixed number of opportunities in your sales pipeline. A qualified lead is often referred to as an opportunity. The BANT framework, which stands for Budget, Authority, Need, and Time, will be used by sales representatives to decide whether or not the lead is worthwhile following.

The BANT approach poses four essential qualification questions:

1. Does this lead have the funds to implement the advice I’m giving?
2. Does the person I’m chatting with have the power to decide what to buy?
3. Does this lead actually require the solution I’m recommending?
4. Will this lead be able to buy something soon enough?

Average Deal Size

The average dollar amount for a sale is referred to as your typical transaction size. For firms that offer software as a service (SaaS) or that charge customers on a subscription basis, where customer lifetime value is one of the most crucial KPIs f or a sales force, this statistic is much more pertinent.

Choose a time period (month, quarter, etc.) and divide the total revenue by the number of deals that occurred during that period to determine the average deal size.

Conversion Rate

Your conversion rate, also referred to as the win rate, is the proportion of prospects who proceed all the way through the sales pipeline to become paying clients.

The conversion rate of your company not only reveals the effectiveness of your present sales strategy but also how well leads have been qualified. Investigating whether there is a common point in the pipeline where leads are frequently leaving is important.

Divide the number of concluded deals by the total number of consumers you’ve interacted with to find your sales conversion rate.

Average Sales Cycle Length

Your sales cycle length sometimes referred to as pipeline length, is the typical period of time it takes for a prospect to convert to a paying client. The length of your sales cycle will be determined by the number of steps in the sales process, the price, and the complexity of the solution being given.

Customers and sales representatives agree that the selling process should be as quick and easy as feasible.

Take the total number of days for all deals and divide it by the total number of deals for that particular time period to determine your average sales cycle duration.

Sales Velocity Formula

In reality, the sales speed equation is fairly straightforward.

Multiply the number of possibilities, average deal value, and win rate together, then divide the result by the typical sales cycle duration to arrive at your sales velocity.

Your company’s sales speed, which is expressed as a dollar amount, is the equation’s outcome. The dollar number inside corresponds to the daily revenue of the company.

Sales Velocity: Best Practices

1. Increase your sales effectiveness by all means
2. Extend the time frame for your analysis of sales velocity
3. Consistently use the same definitions and variables

Increase Your Sales Effectiveness by All Means

First, attempt to raise your opportunities, average deal value, and/or win rate if the findings of your sales velocity equation indicate a need for more sales effectiveness.

In general, you can have problems with the numerator of the formula (the numbers above the line) and yet manage to run a successful sales organization. However, your firm can suffer if there is a problem with the length of your sales cycle (the denominator).

Extend The Time Frame for Your Analysis of Sales Velocity

Second, it is best to study data over a longer period of time. Measure the sales velocity for a period of at least a quarter and up to six to twelve months. This longer sample size takes into account elements like seasonality or an abnormally protracted contract.

Consistently Use the Same Definitions and Variables

Third, while calculating sales velocity, make sure your variables and definitions are consistent. For instance, when do you think a lead qualifies as a good opportunity? Does it begin when a lead completes a certain form? When do they visit your website, specifically a blog post? Or does that not happen until after they’ve arranged their first call? When measuring sales velocity, establish these standards as early as possible and maintain consistency.

How to Increase Sales

You can start working on increasing sales velocity if you have the metrics to do so. If you consider the four measures mentioned above that you use to calculate velocity, it seems sensible to assume that increasing velocity also entails increasing those four metrics.

Increasing Sales Speed by Increasing Your Number of Opportunities

To boost Sales velocity, consider acquiring high-quality leads to increase sales velocity, even if it results in generating fewer leads overall. Bad leads are a reality of life for salespeople, but moving on from them swiftly increases your sales velocity and profitability.

You may find high-quality leads using a variety of tactics, including:

• LinkedIn Ads
• Pay-per-Click Ads
• B2B Lead Generation Techniques

Increasing Sales by Improving Your Win/Conversion Rate

By securing and cultivating high-quality opportunities, like recommendations or prospects who have already shown a strong intent to buy, you can increase your win rate. To do this, you ought to:

• Prospects with insurmountable obstacles should be removed from the pipeline
• Establish precise next actions for top-notch prospects
• As soon as possible, involve the decision-maker

Increasing Sales Speed by Increasing Average Deal Value

Never push a product or service on a consumer who doesn’t need it; doing so will only result in lost prospects and dissatisfied new clients. Instead, identify their buried issues and go above and above what they anticipate, such as:

• a good or service accessories for easier use
• after-sale services including product training and guides

Increasing Sales Velocity by Shortening the Length of the Sales Cycle

The faster sales can be concluded, the more effectively your team works. There are numerous techniques to shorten your sales cycle, such as:

• Automating routine work.
• Determining shared objectives for each sales call.
• Investigating potential customers’ concerns before replying.
• Being absolutely upfront about pricing from the beginning.
• Making contract signing for customers from any device absurdly simple.
• Concentrating on your top-performing channels

How Sales Velocity Is Affected by Discounts

Discounts aren’t always the best approach to boost sales, but you can potentially shorten your sales cycle and boost your sales velocity by giving your prospects incentives to close sooner.

Make sure your representatives are well-versed in how to use discounts to their advantage in negotiations rather than limiting your business’s expansion and acting as a crutch for struggling sales teams.

Monitor and Boost Your Sales Speed

A strong pipeline or larger sales force alone won’t keep a company expanding; in fact, they may even have the reverse impact. Measure your sales velocity, understand the implications of the findings, and put practical measures in place to boost it right away.

Conclusion

Although sales velocity is a fantastic place to start, it’s the sales activities and insights that are hidden from view that will ultimately enable you to fine-tune your sales strategy and improve performance. Start with correct data, such as lead count, deal size, win rate, and sales cycle, for the best outcomes, then apply the aforementioned techniques to get the whole picture.