Sales velocity: the simple equation that will help you hit your number

When making a plan to hit their quota, most sales reps look at how much potential revenue they have in their pipeline. The larger your pipeline, the more revenue you’ll bring in. Right?

Not so fast. Although focusing on the size of your pipeline is a good starting point, it ignores a whole host of other factors that are equally important, including the average value of the deals and how many of them will actually be won. But the biggest problem is that it overlooks the element of time. After all, it doesn’t matter that you could close $50 million in revenue if you won’t close the $1 million required of you before the end of the quarter.

That’s why sales velocity is such a powerful metric for sales reps like me. It enables me to forecast how much I’ll sell and how quickly I’ll sell it. Here I’ll walk you through how to calculate sales velocity and how to optimize its four variables to bring in more revenue faster.

What is sales velocity?

Sales velocity is the measurement of how long it takes a business to generate revenue. It tells you how quickly leads reach each stage of the sales pipeline and how much revenue is generated over a given time period. With the sales velocity equation, businesses can accurately forecast when they’ll hit quota, and sales teams can have clear figures to optimize for stronger performance.

The four main components of the equation are:

• Number of sales opportunities.
• Average deal value.
• Average win rate.
• Sales cycle length.

The top half of the equation shows you how much revenue you can expect to bring in. When you divide the top half by the length of your sales cycle, you end up with an estimate of how fast you’ll bring it in. The higher your sales velocity, the faster you’re making money.

“The higher your sales velocity, the faster you’re making money”

Let’s say you’re working 10 opportunities with an average deal size of $1,000 and your personal win rate is 25%. If your average deal takes 30 days to close, your sales velocity is just over $83 per day. In this case, if you had a quota of $10,000 per quarter, you’d know from day one that you’re going to fall short by over $2,500. That’s the clarity you get from knowing your sales velocity. So if you’re projected to fall short, what can you do to readjust and hit your targets?

4 ways to boost your sales velocity

Many sales reps are tempted to chase whales, those massive yet elusive deals, in the hope of making up a projected shortfall. In theory it could work out, but it’s a risky bet. A better sales strategy than praying for big wins is optimizing for efficiency – increasing your sales opportunities, average deal size and win rate while reducing your time-to-close. If this sounds familiar, that’s because sales velocity is your roadmap.

1. Increase the number of sales opportunities

Having too many deals to work on is usually a good problem to have, but you should only focus on prospects that are the right fit for your solution. Filling the funnel is something that’s on the shoulders of both marketing and sales, but what you do with qualified leads is entirely down to you. In practice, this means you should:

• Qualify leads for quality: Bloating your pipeline for bad leads will only create more work down the line. You want to prioritize viable sales opportunities that have a real chance of turning into revenue, and that starts with having well-defined qualification criteria.
• Be realistic when prospecting: Don’t try to close Walmart if your typical customer is a mom and pop shop. Sales reps tend to pursue companies way outside their ideal customer profile in the hopes of catching a big whale. Instead, focus on customers who are currently getting value from your product and approach similar ones.

2. Drive up your average deal size

Increasing your average deal size can be tricky. Some of the limitations will be the result of intentional choices your company has made like product mix and pricing structure. If your public pricing is $40 per month, you can’t inflate your deal size by deciding to charge $100 instead.

“The key is knowing how to connect price to value”

Other challenges involve soft skills like building relationships with decision makers. Can you effectively cross-sell your prospects on more use cases and more products? The key is knowing how to connect price to value and if you want to do that, then you need to:

• Act like a consultant: Be transparent and informative, strive to understand your prospect’s pain points and pitch the value of the upsell accordingly. When your prospects have hundreds of products to choose from, the importance of being seen as a trusted advisor during the buying process can’t be underestimated.
• Be smart with your time: Sell quickly to smaller opportunities and thoroughly to bigger accounts. Deals with big companies tend to involve more people, processes and requirements, making it critical for you to dive deep into the business’s use case. If you can close your smaller deals in real time, you’ll leave more time to work those larger, more complex deals.

3. Optimize your personal win rate

There’s a common misconception in sales. It’s that most deals are lost to competitors. In reality, most are lost to the status quo. We forget that it requires far less effort for companies to do nothing than for them to purchase and implement a new solution, regardless of whether it’s yours or your competitors’. Our job as sales reps is to show prospects that the grass really is greener on the other side. If you want to set your deal up for success, you should:

• Do an in-depth sales discovery: Most deals are lost in the initial discovery, not at the end of the sales cycle. It is up to you as the sales rep to understand why your prospect is looking for a new solution, uncover their pain and determine the urgency behind solving it. The last thing you want is to end up in the land of “no decision” after months of work.
• Respect your competitors: If you do come up against a competitor, don’t immediately jump to attacking them or going feature to feature. Instead try to figure out why your prospect is interested in your competitor’s solution. Do they do a better job of solving a certain business problem? That’ll enable you to show your prospect how your product delivers long-term value, not just point out why it’s better than someone else’s.

4. Shorten the length of your sales cycle

Like I mentioned earlier, you shouldn’t treat all deals equally. Generally speaking larger deals take longer to close. Bigger companies have more processes and requirements, from procurement to security reviews.

“You shouldn’t treat all deals equally”

In contrast, smaller and less established companies can and do want to move quickly. That’s why the first thing we do do is identify what segment the prospect belongs to, such as small business or mid-market, so we can determine the pace at which we sell to them. With that in mind, here are a few tips to speed up your time-to-close:

• Respond in real time: It’s common sense in sales that the longer the delay, the less likely you are to ever connect with a lead. We wait no more than one hour to contact qualified sales opportunities, but we prefer to aim for the holy grail of a real-time handover from SDR to AE. The intent is never higher than when a prospect is actively checking out your site, and live chat lets you capitalize on that by enabling real-time sales.
• Use content to your advantage: Especially earlier on in the sales process, having a content bank – guides, blog posts, product overviews, templated decks – makes it easy to get prospects the information they need and fast. That way if they’re poking around in the product or chatting with a colleague, you can spare them the back and forth for simple questions.
• Maximize the free product trial: When a prospect is trialing your product, don’t weigh them down by checking in every two days. Instead let your product do the talking. When we do message prospects, we use campaigns in Intercom to automatically send them targeted messages based on what they have and have not done. The goal is ensure they complete their trial successfully and go on to make a purchase.

Optimizing for top performance

Knowing your sales velocity can fill you with confidence on day one of the quarter, give you a clear idea of where you’ll end up by day 30 and significantly reduce stress levels at day 75. It gives you an easy way to understand and optimize the four levers that every sales rep has at their disposal: number of sales opportunities, average deal size, win rate and sales cycle length. Approach each of these four components strategically and with consistency, and you’ll set yourself up to become a higher performing salesperson, quarter over quarter.

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