We’ve all heard the saying over and over; time is money.
Unfortunately, there isn’t really a method to calculate how resourceful we are with our time. Sure, you might have quotas and deadlines that show accomplishment, but what exactly is the rate of your efforts?
Since time is literally money when it comes to business, sales leaders have devised a way to instill dollar value on a day’s work. This intriguing value is what we refer to as sales velocity.
What is Sales Velocity?
As the name suggests, sales velocity measures how quickly your company is making money. It analyzes exactly how fast deals are moving through your pipeline and generating revenue. Once a business determines its sales velocity, it can know how much revenue to expect daily or over a given period of time.
A sales velocity equation typically uses four metrics. These are average deal value, win rate, number of opportunities and length of the sales cycle. The results of the equation reflect the health of the business, the overall effectiveness of the sales teams as well as where your sales team can increase sales productivity to impact revenue goals.
Calculating Sales Velocity
To calculate your company’s sales velocity, start by separating small, mid-market and enterprise pipelines as defined by your organizations nuance of what constitutes each of the segments. Once divided, run a sales velocity equation for each one of the market segments. The equation is as follows.
Sales Velocity = Number of opportunities x Deal Value x Win Rate/Length of Sales Cycle
Factors/Metrics Affecting Sales Velocity
Your customer relationship management software should already be measuring the following metrics. If you need help proving the ROI of Salesforce, let us know, we will help!
1: Number of Opportunities
Also known as a qualified lead, you’re going to have a certain number of opportunities in your sales pipeline. Sales reps typically use the BANT framework (budget, authority, need and time) to determine whether the lead is worth pursuing or not. The BANT method asks questions like whether the lead has the budget and need for your solution, and if they have the authority to make buying decisions in a timely manner.
Making sure your leads are qualified is essential because a small amount of solid leads is better than a large amount of bad ones. If your pipeline is stuffed with bad leads, then your sales velocity calculation won’t be accurate. Some businesses calculate the qualified leads with the amount of overall opportunities or break it down by rep, territory and solutions offered.
2: Average Deal Size
The average deal size refers to the mean dollar value for each sale made. This particular metric is usually more relevant for SaaS companies and businesses that use subscription pricing models where customer lifetime value is the most important KPI for sales teams.
Your company’s average deal size is the only element of sales velocity that directly correlates to finances and profits. However businesses also need to consider customer acquisition cost even though it isn’t a key factor is sales velocity. Because if the revenue generated doesn’t overpower the amount it costs to bring in new customers, then it will substantially hurt profitability.
To get the figure, calculate the average deal size over a given period of time and divide the total by the number of deals completed in the timeframe.
3: Conversion Rate
Your conversion rate is the percentage number of prospect that make it all the way down the pipeline to the final stage to become paying customers. This is a very good indicator of how well your leads are being qualified. The conversion rate also shows the success of your current approach. If you notice a common point in the pipeline where leads frequently exit, then it’s definitely worth investigating to see if there’s an issue.
To effectively calculate your conversion rate, divide the amount of closed deals by the total number of customers or prospects you’ve interacted with. As a bonus, you can boost your conversion rate by capturing and nurturing high quality opportunities such as prospects or referrals that already demonstrated a high intent to buy.
4: Average Sales Cycle Length
The sales length cycle is the average amount of time it takes for a prospect to become a paying customer. It’s also known as the pipeline length and is determined by the number of steps in the sales process, costs involved and complexity of your products or services being offered.
If it were up to either the customer or the sales reps, both would prefer the process to be as quick as possible. However this doesn’t mean you should rush things. The last thing you want is to force prospects into making buying decisions they aren’t ready for.
At the same time, you don’t want to keep them waiting. So try to be mindful of the pace at which each customer prefers and tailor your approach accordingly.
To calculate the average sales cycle for your business, take the total number of days for all deals completed and divide it by the number of deals for that specific timeframe.
How to Maximize Sales Velocity
In the B2B scene, sales are what make the world go round. The faster you can land them, the more successful your company will be. And it all boils down to today’s key metric of the day – Sales Velocity. If you can increase how quickly you convert new leads, then you’ll be making money faster which is always a good thing.
Sure, sales velocity might seem like the buzzword of the year. However, it’s basically a new approach to an age old challenge that sales teams have been facing all over the globe. So, how do you make more or higher sales in a shorter timeframe?
A: Increase Opportunities
The most obvious and effective way to boost sales velocity is by increasing the number of opportunities available. If all the other factors can remain constant, then more opportunities automatically translates to greater sales velocity. Below are a few tactics you can use to create more sales opportunities and improve your pipeline output.
- Bring In More Leads: Most of the best sales opportunities start as a humble lead. Therefore, it makes total sense that your chances of generating more opportunities and closing sales goes up as you nab more leads. A lot of companies are missing out on a colossal amount of leads because they haven’t yet set up a system for lead generation.
If you’re not using them already, some basic approaches to consider are as follows. Giveways, contests, social prospecting, cold email campaigns, PCC lead generation, Inbound and content marketing. Opening up some of these channels could mean a significant boost in your lead count. Unfortunately, more leads is no guarantee that you will end up with more sales opportunities. To make that happen, focus on qualifying them.
- Qualify your Leads: Ramping up the number of leads you get is important. However, bloating your pipeline with dead leads will only create more work and less return down the line. Try to prioritize viable sales opportunities that actually have a real chance of turning into revenue. And it all starts with well-defined qualification criteria.
Similarly, be realistic when prospecting for new leads. Don’t try to close Costco if your typical customer is a small mom and pop store. A lot of sales reps tend to chase big companies that are way outside their ideal customer profiles with the hopes of landing a whale. You might get lucky, but try and focus on customers currently getting value from your products and services.
B: Optimize Personal Win Rates
One of the most common misconceptions is that most deals are lost to competitors. In reality, they are actually casualties of the status quo. We always forget that it requires far less effort for a company to do nothing than purchase and implement new solutions. It’s your job as a sales rep to show prospects that the grass is truly greener on your side. To do this, try the following tactics:
- Conduct a Thorough Sales Discovery: A lot of deals are lost in the initial discovery as opposed to the end of the sales cycle. It’s up to you as a rep to understand why your prospects are looking for new solutions, uncover the pain and see how best you can win them back.
- Respect your Competitors: Many are the times that you’ll come across your competitors. Do not immediately jump in on attacking them. Instead, try to find out why your prospect is interested in the competitor’s product and learn from it. This will show your clients that your product delivers long-term value as opposed to just pointing out why you’re better than everyone.
C: Drive Up Your Average Deal Size
If there’s one trick that almost seems like magic, it’s amping up the average deal size. Now, you could be limiting yourself in terms of product mix or pricing structure. Maybe you’re charging too low for a particular product or service. It’s okay to inflate prices. However, the key here is to connect price to value for the best result. Here’s a few ways to achieve this.
- Be Smart with your Time – The trick here is to sell quickly to smaller opportunities and thoroughly to the larger accounts. It’s always critical to dive deep into the business use case since big companies tend to involve more people. Close your smaller deals in real time and you’ll have more room to work those bigger, more complicated deals.
- Be a Consultant – In addition to being informative and open, strive to understand your prospects’ pain points and adjust your pitch accordingly. With hundreds of products to choose from, your prospects will appreciate a trusted advisor during this process.
D: Cut Down the Length of Your Sales Cycle
As mentioned earlier, not all deals are made equally. Since bigger companies have more processes and requirements, these types of deals take longer to close. On the flip side, smaller opportunities move much quicker. So once you identify what type of opportunity you’re dealing with, you can then determine the pace at which to sell them. Here are a few tips to speed up your close-time.
- Real-Time Response: In sales, you’re less likely to ever connect with leads if you take too long. Once you have qualified a lead, try to contact them within the hour or aim for a real-time handover from SDR to AE. The intent is quite high when a prospect is actively looking at your website and responding to live chat.
- Take Advantage of Content: Early on in the sales process, having a content bank makes it easier to hand prospects all information they need fast. Content such as blog posts, guides, product overviews and other can spare customers the back and forth of simple questions.
Final Word on Sales Velocity
One thing to always remember in sales is that a full pipeline does not necessarily mean a fruitful pipeline. Pay close attention to the four metrics and factors we’ve named above to see how each of them affects sales velocity. Similarly, always measure it regularly to find strengths, weaknesses and variations. Once you know what makes your sales velocity spike, then you’re on your way to successful business growth.
You’ll also need to have the best tools such as a good CRM and an AI sales assistant such as Veloxy. With Veloxy, you can empower your sales team to exceed their sales quotas faster and easier. Use it to take away non-selling activities and automate pipeline management so your team can have more time to spend on selling activities. This way, you can save time, see what truly drives your pipeline, and maximize sales engagement to boost your sales velocity.
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