Sales
Sales Metrics
Breaking Down Sales Velocity: A Comprehensive Overview
Sales velocity tracks opportunities, deal value, conversions, & cycle time. Learn how to use it to accelerate sales performance.
Sales velocity tracks opportunities, deal value, conversions, & cycle time. Learn how to use it to accelerate sales performance.
The faster you can take a new prospect and rapidly turn them into a paying customer, the better. Measuring and optimizing this process can make your sales more effective.
That's why tracking your sales velocity — the rate at which you convert leads and opportunities into closed revenue — is crucial. It measures the speed and momentum of your sales engine.
Then, you can use it as a diagnostic tool to see which aspect of your sales process needs improvement.
This blog will explore the concept of sales velocity in-depth, break down its components, and provide practical insights on optimizing and leveraging this powerful metric.
Sales velocity is a way to measure the rate at which your company generates revenue from its sales efforts. It provides a comprehensive view of how well a company can turn an opportunity into a closed-won deal.
It considers various factors such as the number of opportunities, average deal size, conversion rate, and conversion time.
Understanding and leveraging sales velocity can give companies an advantage by letting them identify potential bottlenecks, make data-driven decisions, and implement strategies to accelerate revenue growth.
Sales velocity is like the tempo of your sales process. It takes into account several factors that impact your sales performance.
It involves coordinating the number of potential customers (opportunities), the significance of each deal (deal size), the rate of successful conversions (conversion rate), and the duration of the entire sales cycle (conversion time).
The formula looks like this:
Let's break that down in simple terms:
Number of Opportunities: This is the number of potential deals or sales opportunities your team is working on. More opportunities generally mean more potential revenue.
Average Deal Size: This is the typical monetary value of each deal you close. Bigger deals mean more revenue per sale.
Conversion Rate: This shows the percentage of your opportunities that become closed-won deals. A higher rate means your sales process is more effective.
Average Conversion Time: This is how long it typically takes to close a deal, from first contact to signed contract. Shorter times mean revenue comes in faster.
Here’s an example of calculating a company’s sales velocity:
Solution
Sales Velocity
Number of opportunities: 200
Avg. Deal Size: $25,000
Conversion Rate: 10%
Avg. Conversion Time: 3 months (90 days)
200 x $25,000 x 10%
= $5,555.56
90 days
The company generates $5,555.56 in daily revenue.
We calculated that the example company's sales velocity was $5,555.56 daily. But what does that number tell us?
A high sales velocity figure is generally reasonable. It means you're cranking out revenue rapidly. That $5,555.56 daily translates to around $166,666 per month.
However, you can't judge sales velocity in a vacuum. You need to compare it to your goals and targets. If your monthly sales quota is $200,000, that velocity may fall short of what you need.
On the other hand, if your velocity exceeds your goals, it signals that your sales engine is performing at its best. The higher your sales velocity exceeds quotas, the more your sales are overperforming.
But sales velocity isn't just about the final number. You can also use it to diagnose potential issues and areas for improvement in your sales process.
Let's say your pipeline of opportunities is growing, but your sales velocity stays flat or decreases. That's a red flag! It tells you that increasing lead volume isn't enough — bottlenecks or leaks in your funnel prevent you from closing more deals.
Your conversion rates may have dropped due to increased competition, or your average deal sizes may be shrinking as you chase lower-value clients. Velocity exposes these potential problems so you can course-correct.
You can pinpoint the weak links holding back your velocity by digging into the individual components like conversion rates, deal sizes, and cycle times. Then, you can strategize ways to optimize and remove those bottlenecks.
The beauty of sales velocity is that it doesn't just diagnose issues — it also shows you exactly which levers to pull to accelerate your performance. Let's go through some ways to optimize each factor:
This first component is about pumping more high-quality potential deals into the top of your sales funnel. More opportunities mean more chances for your team to drive closed revenue.
You should have enough of the right kinds of potential deals consistently entering your pipeline. That momentum and volume will directly feed into higher sales velocity down the funnel.
Here are some simple ways to increase that opportunity volume:
Focus on marketing activities that generate more leads, such as content, LinkedIn ads, events, email campaigns, etc.
Instead of mass marketing campaigns, invest in targeted marketing for your ideal customer profiles to attract leads that are more likely to close. The more you feed the top of the funnel, the more potential deals will trickle down.
Extend your reach to new markets, customer segments, or sales channels you need to tap. You could be missing out on a whole universe of prospects.
You can also cross-sell additional products or upgrades to your existing customer base, who are already familiar with your offerings.
Get savvier about qualifying leads upfront. Weed out the reluctant buyers earlier to pursue higher-quality opportunities that are more likely to close.
Now, let's talk deal sizes. Since velocity factors in the actual dollar amounts of each transaction, focusing efforts on higher-value deals can be a giant accelerator. Here are some strategies to use:
Rather than chasing many smaller deals, prioritize selling into higher-value customer tiers, products, or service levels. An enterprise client is more lucrative than a dozen smaller contracts.
Rather than just offering pieces of the puzzle, strive to solve more significant, comprehensive challenges for your customers with integrated solutions. Then, continue to provide them with value post-purchase through after-sales service.
For example, instead of selling a company just your CRM software, position yourself as the end-to-end expert who can overhaul their entire sales infrastructure—from CRM to marketing automation to quoting tools to training services.
Closing more of those open opportunities is what drives revenue. So, optimizing your conversion rates from prospect to customer should be a significant priority in increasing sales velocity.
Here are some simple strategies:
Analyze your sales process in-depth to understand what's working well versus where prospects are dropping off. Then, optimize accordingly. Minor tweaks can have a compounding effect across your whole funnel.
Invest in training, coaching, tools, and content that make your sales reps accurate subject matter experts. The better they are at their job, the higher the conversions.
Leverage sales technology and automation to create more efficiency and seamless handoffs between stages. With a streamlined process, fewer gaps exist for opportunities to fall through.
Get to the root of common objections or friction points that cause prospects to stall or bail. Then, develop strategies for overcoming them.
The quicker your sales process, the faster your reps can close deals. Cutting just a few weeks off your average sales cycle can substantially elevate velocity and revenue.
So, look for ways to cut out any non-essential delays:
Set clear buying timeline expectations upfront when qualifying prospects so there are no surprise delays later. Be upfront about your typical sales cycle length and when you'll need decisions.
However, you should also allow the prospect to discuss their evaluation timeframes to ensure alignment. Mismatched timelines are a major cycle-time killer.
Optimize processes between funnel stages for smoother handoffs and less lag time. No opportunity should get stuck in limbo.
Map out your current hand-offs, like marketing to SDR to AE, and identify gaps, double-entries, or inefficient processes. Automate whatever you can, including internal hand-off notifications and alerts.
Sales velocity is a powerful metric that gives you a comprehensive view of your sales engine’s health and momentum. You can use it as a diagnostic tool to identify bottlenecks and how to remove them.
You can directly impact your organization's revenue growth by understanding and optimizing components like opportunity volume, deal sizes, conversion rates, and cycle times.
Whether you need to generate more opportunities, increase deal values, improve conversion, or accelerate cycle times, velocity tells you exactly where to focus your efforts.
Optimizing your sales velocity is just one piece of the high-performance sales puzzle. There's so much more to master regarding successful selling.
If you want to take your sales game to an entirely new level, check out our comprehensive suite of sales enablement resources: