What is Sales Velocity?

You may have heard the buzzword “Sales Velocity” recently. So what exactly is it and do you need to take notice of it?

This short article explains what it is and at the end of the article gives you four ways to increase it.

Define: Sales Velocity

A simple way to think of sales velocity is to compare it with normal velocity i.e. if normal velocity is Miles per Hour then think of Sales Velocity as Money per Day.

Or in other words: How much and how quickly are you making money?

How do you measure Sales Velocity?

You can calculate your Sales Velocity using this formula:

Sales Velocity = Number of Leads x Win Rate (%) x Average Deal Size / Average Sales Cycle

For example:

39 Leads x Win Rate 8% x £17,000 Ave. Deal Size / 30 Days Ave. Sales Cycle = £1,768 per day

I know my Sales Velocity, now what do I do with it?

The best use is for making comparisons to identify what works and what doesn’t.

Normal velocity has a direction, so imagine your sales people, products and marketing campaigns as the direction for sales velocity. Compare which directions have the greater Sales Velocity. Ask yourself why is one performing better than another and look to address those examples where the sales velocity is lowest.

How can you Increase Sales Velocity?

You can increase your sales velocity:

- By increasing any of the following: Number of Leads, Win Rate %, Average Deal Size
- By decreasing your Average Sales Cycle

And remember, 20 Leads with a 50% Win Rate is better than 50 Leads with 10% Win Rate (assuming they have the same value).

Four ways to Increase Sales Velocity

1. Improve your Win Rate

A common trap is to waste time on opportunities that ultimately are not going to close. You may have a great rapport with your prospect but if there is insufficient pain for them to make a change then you should move on. Do you have any deals like this in your pipeline right now?

2. Increase the Average Deal Size

Your immediate thought here may be to include additional products and services in your proposition. However, first of all you should look at the final discounts you are giving away with your current deals. If you are regularly discounting then look for ways to avoid this e.g. is your value proposition right? would a negotiation skills course help?

3. Decrease the Sales Cycle

Have you developed a sense of urgency within your current opportunities? i.e. is there a stated goal and deadline for each opportunity and do you & your prospect understand what steps are required to achieve that goal? Is the prospect concerned about missing that deadline? If not, then is it a realistic completion date?

4. Improve Lead Quality

Do you regularly prospect for your own leads or are you relying on inbound leads from marketing? As a sales person you should know what your ideal prospect looks like and how to find them. Once found you should know how to stimulate interest in your products and services rather than relying on finding people who are already in the buying cycle. Share this knowledge with marketing to help them generate the right kind of leads for you.

You could also compare why some campaigns generate better leads than others. For example Trade Show leads might have a lower sales velocity than your Networking Events. If so, perhaps pre-show marketing could be employed or improved to get better quality visitors onto your stand.

Date: 22nd March 2013

Author: Duncan Gillingwater

Posted in CRM