Sales Velocity – The Most Important Sales Metric You May Not Be Tracking

July 26th, 2017

The single most important sales metric for sales managers is the velocity of conversion through the funnel stages.”

– Jaime Muirhead, VP of Sales, RingLead

Speed is essential in the B2B world. This makes sales velocity an important metric to measure. However,most businesses ignore it. In this article, we’ll cover what sales velocity is, why you should care, and why it’s often overlooked.

What is sales velocity?

Sales velocity is the measurement of how swiftly deals get closed. A higher number is better. It is calculated with the following metrics:

  • Number of leads;
  • Conversion rate;
  • Average deal size;
  • Average number of days to close;

Use the formula below in order to calculate your sales velocity:

I propose doing something similar, which should be simple enough, but doing it a bit more aesthetically pleasing. The formula can’t change, but the way it’s presented – can. You can use the same color scheme as the site and the same font, giving it a sense of branding. (this note is not counted towards the word total of the article)

Why is sales velocity important?

Wasting time is detrimental to the process. Thanks to sales velocity, you can measure how efficient you are. This makes it one of the most important metrics out there. A high sales velocity means your business is generating profits faster. Low velocity means something is wrong along the sales pipeline. You should find out what it is and fix it.

Why is sales velocity generally overlooked?

Sales velocity is easy to calculate, but it’s difficult to improve. You need to get into the details and seep through lots of data before you can get any answers. Of course, this process doesn’t need to be that complicated – there are big data companies (you can link to your product here) who handle this specific task on a daily basis.

Why is sales velocity more important than other metrics?

Sales velocity allows you to increase your profits by changing a few habits in the sales cycle. It’s a matter of gathering the right data and fine-tuning the process. Very few metrics can make the same claim without being full of it.

To put things into perspective, increasing your conversion rate by 10% and decreasing the average number of days to close by 10% gives you a 21% increase in your sales velocity. This is changing only two metrics in the sales pipeline. There are moreoptions explored in this article on KiteDesk.

Practical example of sales velocity in action

We were consulting a B2B enterprise software company a few years back. They were generating lots of leads through their marketing efforts. Yet, they were having trouble with conversions. Their sales figures were decent, but the conversion rates were awful. They thought the leads were bad.

The Problem

Upon inspecting their sales process, we found something interesting. They were using SDR, but the SDR were asking the wrong questions to qualify leads. Their sales velocity was low due to bad operator training. The real problem was reporting, but they were qualifying for analytics.Customers did not respond to this because didn’t think they had budget for analytics. After all, they were struggling with basic reporting.

The Solution

We listened to some calls and found out the operators were asking the wrong questions. They also wasted a lot of time with obviously dead-end clients. We recommended better training for the SDR. Additionally, we helped them realize reporting was the first step to analytics.

After the problems were fixed, conversions went up nearly 30% over the next 3 months. Sales velocity improved. SDR started to send people to the appropriate places. Do not underestimate the importance of sales velocity.

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