Jan 3, 2023

Sales Velocity: The #1 Sales Metric You're Probably Not Measuring

Mark Fershteyn
CEO & Co-founder

As the old saying goes, "time is money," and it rings especially true in business-to-business sales.

Today, when thinking of sales metrics, a familiar list of figures comes to mind.

It's standard across any and all organizations.

Sales revenue to track performance, sales cycle to measure efficiency, conversion rates, and quotas are all metrics sales managers use to improve their team's performance. All individual stats that, when tracked, give sales reps insight into their sales activity.

But what most sales teams are missing out on is a key indicator of success. It's a metric that combines all those individual stats to give you a holistic view of your sales process and performance.

That metric is sales velocity.

What is sales velocity?

Sales velocity is a sales metric that measures the average speed at which sales are finalized, and revenue is collected. It shows how quickly leads can be added and moved down a pipeline to become paying customers, revealing efficiencies and inefficiencies alike.

When breaking it down, there are four components to sales velocity: the number of opportunities, average deal size, win rate, and sales cycle.

Number of Opportunities

An opportunity, also known as a qualified lead, is a salesperson's chance to make a sale. When sales reps can generate a high number of opportunities, it will increase sales velocity by providing sales teams with more chances to close deals and generate revenue.

Average Deal Size

The second component is the average deal size. This is the amount of money each opportunity is estimated to produce when closed. The larger the sales opportunity, the more revenue sales reps will be able to generate with each sale.

Win Rate

The third component is win rate. This is the sales team's ability to close sales opportunities. A higher win rate means sales teams are closing more, increasing their sales velocity.

Sales Cycle

The last component of sales velocity is the sales cycle, which is the average time it takes for a rep to close each deal. The shorter sales teams are able to close their sales cycles, the faster they will be able to generate revenue and increase sales velocity.

Sales Velocity Formula

The sales velocity formula

To calculate sales velocity, sales teams should multiply the number of opportunities in your pipeline by the dollar value of your average deal size and your win rate. Then, divide the result by the number of days in your average sales cycle.

The result is the sales velocity rate, which indicates how much activity and expected revenue sales teams can expect during a given period.

Why is sales velocity important?

Measuring sales velocity enables team leaders to identify areas of improvement and gain insight into their sales process. With competition reaching an all-time high, the speed at which sales teams can close sales and gain market share sets a business apart.

The data point provides actionable insights into sales performance, so sales managers can develop strategies and tactics to optimize their sales process.

Without an ongoing evaluation of sales processes, sales teams may miss out on opportunities, valuable insights, and, most importantly, revenue.

How do you increase sales velocity?

When looking at the four segments that make up its formula, sales teams have many options and methods available to improve sales velocity.

Increasing the number of opportunities

Generating more leads can increase sales velocity by providing sales reps with more opportunities to close sales.

To do this, sales teams need to focus on lead-generation activities, including:

  • Cold-calling and emailing
  • Creating content
  • Inbound Marketing
  • LinkedIn outreach and advertising
  • Attending events, tradeshows, and conferences

Increasing the average deal size

Another method is to increase the average dollar value of each sales opportunity.

To accomplish this, sales reps should look for ways to add value to their services or products and upsell and cross-sell customers on additional features.

Other ways to increase deal size include bundling products or services in your offer, extending into other areas of the customer's business unit (i.e. other business units,  departments, etc), or increasing the length of the offered contract with the client.

Improving the win rate

The most difficult of all, sales teams should focus on improving their sales win rate.

This is achieved by honing sales skills, targeting the right ideal customer profile, including the proper decision makers early on, developing sales close strategies, and creating a systematic approach to understanding customer needs and sales objections to offer the right solution.

Optimizing sales cycle

Finally, sales teams should strive to shorten sales cycles by automating sales processes, streamlining customer onboarding, tracking customer behavior and feedback, and preparing sales reps with the right sales tools. By giving them the sales content that enables the sellers and customers, along with the tools to streamline sales processes, sales teams will be able to optimize sales cycles and increase sales velocity.

While many of these data points are recognized individually, combining them through the sales velocity formula allows you to identify which tactics and segments have the most significant effect on your overall ability to generate more business.

Optimize sales cycles with Recapped

A surefire way to increase sales velocity

Improving your sales velocity is all about creating a customer-centric sales cycle and making it as simple as possible to purchase your solution.

It requires intense listening, identifying your customer's pain points and desired outcomes, and educating them on the benefits of investing in your product or service.

By adding customer-collaborative tools like Recapped, where the entire customer journey is maintained in one place, sales teams can streamline the sales process. It gives the customer and all of their stakeholders the correct information when they need it, enabling you to shorten the sales cycle and increase the win rate simultaneously.

Ready to ramp up your sales velocity? Schedule a consultation with Recapped today and see how  our customer-collaborative platform can take your sales process to the next level: