Every business talks about “sales velocity” and how to accelerate this momentum to drive sales and reach goals. But what exactly does sales velocity mean? Sales velocity at its core “is the measurement of how much money your business brings in over a specified period of time. A higher sales velocity means you're bringing in more money, over less time.”
Your product is valuable and is selling, but how do you accelerate growth? Sales velocity is more than an ideology, it’s a method with four key metrics that play into each other:
- Average deal size
- Win rate
- Number of qualified opportunities
- Length of sales cycle
All of these metrics work together to help a business measure its sales velocity, quantifying sales teams’ performance:
This equation helps sales teams’ prioritize the work they’re doing while also putting time back into their hands. So often are sales teams working on deals that are not likely to close, leaving quality leads in the pipeline or yet to be discovered. The key to selling more faster is identifying key performance indicators on closed-won new business and using that to drive high-quality leads.
Let’s dive into each of these four metrics so you know where to start in calculating your sales velocity strategy.
Average deal size: Focus on value
This is calculated by the total revenue achieved in a set period (e.g., a month, a quarter, a year) divided by the number of closed-won opportunities for that segment. The segment can be new business, existing business, or total business — whichever segment makes the most sense for your company to track.
Maximizing time spent on a deal is the key to amping up your average deal size number. How can you enhance the value of your product(s)? How can you make the deal sweeter for the prospect without overselling or extending the length of the sales cycle? In our ebook, we outline how discounts and cross-selling and upselling can work to increase deal size. While discounts can be a good thing, there should be a structure around providing discounts. Take a look at our ebook for more details on how to implement this tactic with success.
Win rate: Determine your success factors
Your win rate is your number of sales won divided by number of opportunities. Amp up your win rate by focusing on high-quality leads. What characteristics do these customers/prospects have in common? Focus on the common thread across these high-quality leads and prioritize targeting similar leads in your nurturing activities.
Number of opportunities: It’s about quality vs quantity
Your pipeline is packed with leads, but are they prospects that will actually turn into customers? Your win rate, nurturing activities, and total sales will suffer if time is spent on bad leads. Weed out leads that don’t hit your high-quality factor checklist. Remember, time = money. Cut these time-wasters from Day 1 so your team can focus on leads that have a higher percentage of closing.
Length of sales cycle: Tips for closing deals faster
The fastest way to shortening your sales cycle is identifying bottlenecks and proactively looking at consumer behavior. Take a look at your sales playbook — does this need to be reviewed based on new product features and enhancements? How are consumers driving demand in your industry? Does your sales team need more resources?
Identify what part(s) of the sales cycle stall productivity. 86% of respondents to a SpringCM study noted that contracting takes anywhere from 2 to 6 weeks. The longer it takes for contracts to be reviewed, redlined, and approved between the transacting partners, the longer it takes for the deal to close. Investing in a contract solution that removes the aches and pains contracts cause during the sales process can put weeks back into your sales team’s hands.
Your step-by-step guide to sales velocity
Our comprehensive guide, "Sales Velocity: Identifying Bottlenecks and Improving Efficiency One Variable at a Time" walks through each of these four metrics in detail, providing use cases and best practices to amplify your sales growth. Download our free guide today, and follow us on LinkedIn and Twitter for more daily tips.