- Why is Sales Velocity such an important metric?
- 4 main factors that affect Sales Velocity in companies
- 1 – Number of opportunities
- 2 – Average size of the business
- 3 – Conversion rate
- 4 – Sales cycle
- Bonus: How to Calculate Sales Velocity
- Sales Velocity: how to increase sales velocity?
- Increase conversion rate
- Optimize the average ticket of the business
Sales Velocity, translated into Portuguese, can be understood as sales velocity. It is a metric that is used to analyze an amount sold in a certain period of time. Understanding it and optimizing it is something that companies need to continually pursue.
The faster a business converts leads into paying customers, the more successful the business will be.
After all, sorry for the cliché: but time is money.
Sales Velocity is a measure of how quickly a business is being profitable. The metric analyzes how quickly leads move through the pipeline.
In addition to indicating how much value new customers provide in a specific period of time.
Today’s article has 2 purposes to help with sales management.
- We’ll talk about the importance of Sales Velocity and the impact it brings;
- Factors that influence the speed of sales in companies.
Let’s check out these topics?
Why is Sales Velocity such an important metric?
Sales Velocity plays a huge role in the ability of any business to thrive and grow.
After all, it’s quite a truism, right?
The less time it takes a potential customer to go through the funnel steps , the faster your team can close more sales.
So, when sales speed is higher, more revenue is generated in less time.
Sales Velocity tracking over time allows you to:
- compare sales speed between people on your team;
- view effectiveness by product, segment sold, or region served;
- note how changes in the sales process impacted the business.
Understanding the speed at which it sells can also help to know the so-called “ predictable revenue ” of the business.
That is, how much money you can predictably come in month after month based on historical conversion rates.
And by understanding the rates, it will be possible to see exactly which stage of the funnel needs to be improved.
It’s actually an endless cycle of constant improvement within the sales process.
4 main factors that affect Sales Velocity in companies
There are 4 factors that affect sales velocity within the funnel.
- Number of opportunities in the pipeline;
- Average business ticket;
- Conversion rate;
- Sales cycle.
Together, these metrics are used to calculate Sales Velocity. And they help to understand how it changes over time.
With analytics and technology, you can discover how to optimize operations to get more sales in less time.
Let’s better understand each of the factors:
1 – Number of opportunities
How many opportunities can your team work in a given period?
If you want to compare sales speed internally, you can also divide the opportunities by:
- segment sold;
- region served.
2 – Average size of the business
For many companies, this is simply the amount in reais of an average sale. The so-called average ticket .
But if we’re talking about SaaS sales or subscription-based products, LTV is an extremely useful metric.
3 – Conversion rate
How many leads became paying customers in a given period?
If your team had 100 leads to work in the sales funnel and 30 became paying customers, you have a 30% win rate.
This way. Pretty straight forward.
4 – Sales cycle
How many days does it take for potential customers to go through all the stages of the funnel?
The answer depends on how many steps there are in your sales cycle , as a matter of fact.
In addition to the complexity of your product and the cost of your offering.
Bonus: How to Calculate Sales Velocity
The sales velocity formula requires the following data:
- Number of opportunities in the funnel;
- Value in reais of the average ticket sold;
- Customer Conversion Rate with a win vs. loss percentage;
- Average sales cycle in number of days.
Stays like this:
But let’s say your company has 50 opportunities with an average win rate of 25%.
The average ticket is R$ 10 thousand. And the sales cycle, in turn, lasts 60 days.
Sales Velocity = (50 x 0.25 x 10,000) / 60
This gives: BRL 125,000 / 60
As a result: R$ 2,083.33.
What does that mean?
The company is generating very similar value to that as revenue every day.
Knowing these numbers, it is possible to focus efforts and resources to:
- increase the average ticket (improve the subscription plan?);
- reduce the sales cycle (optimize the follow-up step ?);
This calculation alone will not reveal much about the health of your business.
To get a complete picture, you need to put the numbers in context.
The real value comes from consistently tracking sales velocity at regular intervals.
Then use it to compare the effects that proposed changes to the sales process have had – or not.
Sales Velocity: how to increase sales velocity?
For any manager who wants to increase his team’s sales, there are several approaches to take.
Some examples of what can be done:
Increase conversion rate
Having higher conversion rates takes work. It forces companies to find, prospect, nurture, and better qualify their sales leads.
It requires refining marketing strategies to attract the right people. Forces to have a more assertive lead qualification script.
It demands a personalized speech from the salesperson and also much more persuasive follow-up steps.
So, it is up to the head of sales to analyze the reports within the CRM. Where is the bottleneck? In which step of the funnel? And in which funnel, actually?
Optimize the average ticket of the business
There are, of course, benefits to closing high-value deals. However, larger sales tend to take longer to close.
So the real key to improving sales speed is balance.
It’s about balancing high and low value opportunities. Thus, your team can manage time efficiently.
One way to value the business can be in using a combination of strategic discounts. Using cross selling and up selling strategies also helps.
Sales cycle reduction
Sometimes deals take too long to complete. As a solution, try dividing the sales process into stages. And be aware of bottlenecks.
Are there any specific stages in the pipeline that are slowing the business’s progress?
Consider changing your sales CRM, for example. Especially if you are unable to extract reports for every step of every funnel.
In this way, you will be seeing, controlling and accelerating sales. And your company’s Sales Velocity will only grow.
So, how can we help you?
If you have questions about the article or want to know more about how a CRM helps your business: TALK TO A CONSULTANT .
Enjoy and read two articles that will help your team to sell more and better daily.
The first talks about how to establish a CRM culture in companies and how it helps in sales.
The second discusses how a CRM strategy is decisive for optimizing your team’s routine.
A hug from PipeRun, your CRM. #RunPipeRun