You already track a lot of metrics that tell you how your sales reps are performing, show you which strategies are working best, and even help you forecast your future sales more accurately. Sales velocity is a particularly informative data point to give you more clarity on the health of your sales pipeline.
In this blog post, we’ll take a closer look at sales velocity.
First, we’ll explore what this metric means and how you can come up with — and use — your velocity numbers.
With that established, we’ll dig into some effective strategies to help your sales team improve sales velocity over time.
What is sales velocity?
In the simplest terms, sales velocity is the speed and efficiency at which a customer moves through your pipeline and generates revenue. Higher sales velocity means that your prospects travel through the sales cycle more quickly and close more effectively.
You might also hear it described as tunnel or pipeline velocity — those are the same things.
Measuring sales velocity is important because it tells you how healthy your pipeline is. Plus, when you forecast future sales based on your current number of opportunities, you need to know how long it’s likely to take those prospects to move through the funnel and close.
The higher your pipeline velocity, the better off your business will be.
Low velocity means that your sales reps are investing a lot of time to close lower-value deals. Increasing your sales velocity means that your sales team is doing less work to generate more revenue.
It’s important to track sales velocity over time, too, especially after implementing strategic changes.
For example, imagine you’ve just added a new software tool to your sales tech stack. You expect it to save your sales reps time.
When you track your sales velocity, you can clearly see that velocity increased in the few weeks following the introduction of your new tool.
Your expectation is confirmed! The new system does what it’s intended to do.
How to calculate sales velocity
The formula to determine sales velocity is fairly straightforward. You just need to use the sales velocity formula:
Sales velocity = (Number of opportunities × Deal value × Win rate) ÷ Sales cycle length
Understanding your sales velocity comes down to these core metrics. Let’s explore each component individually.
Number of opportunities
The number of opportunities in your pipeline is not the same thing as the number of leads in your CRM.
Leads become opportunities when they’ve been qualified. Your qualification process may be broad, or it may be highly specific.
For example, if you sell an SEO plugin for WordPress, your leads might include people who downloaded an SEO guide for self-employed solopreneurs. Those leads will only become opportunities when you confirm that they use WordPress to manage their online business.
Deal size, also called deal value, is the average amount you make in a closed sale.
For subscription-based business models, you might want to consider your average customer lifetime value instead of the average deal value. However, since this metric requires long-term data to calculate, using LTV will make it more difficult to track decreases or increases in sales velocity.
You probably watch this data point closely. Win rate is the percentage of deals your sales team closes.
Sales cycle length
The length of your sales cycle is the denominator in your sales velocity equation.
That makes sense because calculating sales velocity tells you whether the amount of time your sales team spends on a deal makes sense, given the percentage of deals they close and how much revenue they generate.
Most likely, you’ll be able to pull the length of sales cycle metric directly from your CRM.
How to increase sales velocity
Now that you know how to measure sales velocity, let’s employ some strategies to make it better.
Remember, increasing your velocity means that your team can generate more revenue in less time. There are four effective ways to do that.
1. Increase the total number of opportunities
The simplest way to increase sales velocity is to scale whatever you’re doing to generate opportunities at the moment.
If cold calls bring in the best opportunities, make more cold calls. If email is a particularly effective channel for you, scale up those operations.
However, here’s a caution:
Adding more leads to your pipeline does not guarantee that you’re going to generate more opportunities.
Low-quality leads can actually decrease sales velocity because your sales reps have to waste time disqualifying prospects that never should have been in your pipeline in the first place.
Focus on generating high-quality, qualified leads from proven sources. If you need more ways to generate leads, look for quality over quantity.
This is a good time to work on your process for taking marketing-qualified leads (MQLs) to sales-qualified leads (SQLs).
Consider how you’re currently qualifying leads and update your strategy as needed to account for an influx in new pipeline entries.
As you increase the volume of opportunities, it’s also crucial to make sure that your sales reps are ready to handle that flow.
Using a tool like Weflow can help tremendously. Weflow automates some of the most time-consuming parts of the sales process and keeps your reps true to your sales methodology with smart features like note templates.
By increasing the efficiency with which your team can work, you make plenty of room for a higher volume of opportunities.
2. Improve your win rate
Next, consider ways to improve your win rate. The more of your opportunities ultimately become customers, the higher your sales velocity will be.
Here are a few tips to help increase your closing rates:
- Uncover the entire buying committee – Who is involved in the deal on the buyer’s side? Make sure that you know who the stakeholders and decision-makers are because an objection from an unknown party can derail a deal.
- Try to involve the decision-maker as soon as possible – In sales, we always deal with gatekeepers. The sooner you involve the decision-maker, the sooner you know whether a deal is even viable.
- Define clear steps at every stage – Throughout the sales process, keep the prospect involved and informed. They should know what comes next (and your sales rep should, too) so that deals don’t fizzle out.
- Offer ongoing coaching and training – Upgrading your sales team’s skills is a great investment. Make sure that your reps are equipped to succeed.
- Use smart tools to prioritize deals – Too many deals die simply because they slip through the cracks. Use a tool like Weflow to help prioritize deals correctly. Your reps will get insights into risk factors and deal signals to help prevent deals from falling through.
3. Increase the average deal size
If deals are bigger, it’s fine for reps to take some extra time moving them through the pipeline.
Start by implementing a value-based negotiation strategy.
Instead of focusing on the overall cost of your offerings as the primary selling point, your team will have more negotiating leverage if they focus on the actual value to the customer.
Do you save them time or money? Can you help them generate additional revenue? Those are stronger selling points that enable you to close bigger deals.
The most obvious way to increase average deal size is through upsells and cross-sells, and you should train your reps to offer additional products and services whenever it makes sense.
However, upselling is far from the only way to increase your average deal size.
We already talked about qualifying your leads, but it’s relevant here, too. As you qualify your leads, consider ruling out buyers who are particularly cost-conscious or driven by discounting. Better leads are usually willing to spend more to solve their bigger problems.
Speaking of discounting, be careful about your discount strategy. Data shows that heavy discounting can significantly impact your customer lifetime value and contribute to higher churn when those buyers are faced with a renewal or a follow-up purchase at the regular price.
4. Shorten the sales cycle
Finally, you can increase sales velocity by shortening your sales cycle so that prospects move through your funnel more quickly.
This strategy is all about efficiency. Software is a big help here, especially when it reduces the amount of time your reps spend on routine tasks.
E-signature software like DocuSign or Dropbox Sign is great for speeding up the contract signing process. If you’ve ever waited on pins and needles for a customer to print, sign, scan, and return a contract, you know that a quicker contract is a welcome change.
Scheduling tools like Calendly are also key for salespeople. The less back-and-forth it takes to schedule a call or demo, the better off everyone is.
Find more efficiency in your sales strategies, too.
By investigating and dealing with objections as early as possible, you can prevent time-consuming roadblocks later in the sales process.
Smart use of content like testimonials, case studies, and even your company website can also shorten the sales cycle by giving the prospect all the tools they need to educate themselves.
Remember that today’s buyers are more educated and independent than ever, and they like having resources to answer their own questions.
Increase your sales velocity in 2023
As you look at your strategy for this year and beyond, focusing on sales velocity is a smart move. All sales teams could benefit from closing deals faster and spending less time on revenue generation.
Keep in mind that it’s more effective to make changes gradually instead of trying to implement a new system overnight.
Choose a specific area to focus your attention on as you improve your sales velocity. Maybe you want to work on finding more opportunities, or perhaps you know that your team could really benefit from shortening your sales cycle with some good software tools.
Whatever you choose, make it your primary goal for the next 2-4 months, then come back to this article to identify your next opportunity. Bookmark this post so you can find it again when you’re ready.