October 25, 2022
Sales velocity is a measure of how quickly your business is earning money. More specifically, it reveals how much revenue a sales team generates every day. It's hands down one of the best metrics to keep your eye on if you’re looking to increase revenue.
Many businesses only look at leads and revenue generated, but these numbers don't tell the full story. You need to measure leading indicators that predict whether or not you're going to hit the ultimate revenue goal you've assigned to your sales team.
Sales velocity is a single number that measures the four most important leading indicators that show whether or not you're getting better over time and that you're more or less likely to hit target.
Why You Should Measure Sales Velocity
Revenue is a lagging indicator, but the four metrics that get calculated in sales velocity are leading indicators. They tell you what's going to happen.
Sales velocity as a standalone number doesn't tell you much, but tracking it from week to week will tell you if you're getting better or worse over time, and if you're reaching capacity with your sales team or if you're underperforming as a team.
Sales velocity is mostly used in the software as a service (SaaS) industry, but every industry could get value from calculating and tracking it.
How to calculate sales velocity
To calculate your sales velocity, you’ll need data on these 4 factors:
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Number of opportunities: The number of qualified opportunities that come into your pipeline (ie: not top-of-funnel leads, but ones that sales have qualified).
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Average deal value: How much revenue in your currency of choice you generate from each deal, on average.
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Win rate: Your closing ratio (for example, 25% win rate would be 0.25).
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Length of sales cycle: On average, how many days it takes from the time someone becomes a qualified opportunity to the time they're closed:won.
Plug these 4 factors into the sales velocity formula like so:
(Number of Opportunities X Average Deal Value X Win Rate) / Length of Sales Cycle
"Sales velocity is only as good as how you track it," says Proposify Director of Sales, Scott Tower.
If you look at it as just one snapshot, it's going to mean absolutely nothing. You have to create a baseline and then track it over time to monitor where it goes from there.
To do this, you'll need to make sure you're regularly collecting all the data that gets plugged into the sales velocity formula. Your CRM software should be able to do this easily, but if you're not using a CRM you can track this in a spreadsheet each week.
Example calculations
Formulas are important, but they don’t give you a sense of what you can really measure without context.
We’ve created 3 different examples to help you understand the different kinds of insights this metric has to offer.
Example 1: Individual contribution
Let’s say you want to evaluate your own individual sales velocity for Q3.
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Number of opportunities: You’ll need to tally up the number of opportunities you had that quarter (ex: 100).
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Average deal value: You can use your own average deal size over the course of the quarter, or use your company’s average deal size if you don’t have that available. (ex: $5,000).
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Win rate: If the metric is available, use your own win rate for the quarter. If not, you can use your sales team’s average win rate. (ex: 20%)
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Length of sales cycle: Your average sales cycle is best measured on an annual basis rather than a quarterly basis for accuracy, so go ahead and use your typical average sales cycle. (ex: 90 days)
The final calculation:
This means as an individual you’re bringing your company $1,111 per day every day on average (including weekends).
Example 2: Regional team
Now, let’s say you want to measure the sales velocity of a regional team over the past year.
- Number of opportunities: Determine the total number of opportunities for the entire team over the past 12 months (ex: 2,500).
- Average deal value: Now discover your average deal size over the past 12 months (ex: $6,500).
- Win rate: Tally up the win rate for that regional team for the past 12 months. (ex: 18%)
- Length of sales cycle: Now determine the length of the sales cycle for that particular team over the past 12 months (ex: 105 days)
The final calculation:
The team is bringing in $27,857 every day on average, which adds up to almost $10 million per year.
This metric is helpful for understanding team success because the size of the team isn’t a factor. What matters are the results.
Example 3: Channel success
For our last example, let’s take a look at the sales velocity of all inbound channels for the entire sales team over the past 12 months.
- Number of opportunities: Calculate the number of opportunities that came from inbound over the past 12 months. (ex: 4,000)
- Average deal value: Calculate the average deal size of all closed opportunities that came from inbound over the past 12 months. (ex: $3,700)
- Win rate: Calculate your sales team’s average win rate for inbound opportunities over the past 12 months. (ex: 25%)
- Length of sales cycle: Determine the average sales cycle length for inbound leads specifically over the past month. (ex: 65 days)
The final calculation:
This would mean that your sales team is generating an average of $56,923 every day with inbound leads (or over $20 million per year).
You could compare the success of all inbound channels with the success of all outbound channels with a sales velocity calculation for outbound and see which number is higher. For most companies, the inbound channel will have a greater sales velocity because leads are more likely to convert (and convert more quickly).
You could also use this comparison to help the marketing team make a case for a bigger budget for inbound marketing. Or, this comparison might inspire you to innovate ways to make the outbound sales process feel more inbound, such as with better resources, more informative proposals, or more hands-on, conversational marketing.
You could also break your comparison down even further and gauge the sales velocity from specific inbound channels (such as the blog vs. webinars) so you can discover which channel is producing the hottest leads—and then invest more in it.
How to Improve Sales Velocity
A higher sales velocity means your company is making more money from your sales team's efforts and thus has a better chance of staying healthy and profitable in the long run.
To improve your velocity in sales, you need to improve the four factors that go into the metric (opportunities, deal size, win rate, and sales cycle).
Increase the Number of Opportunities
The opportunities that come into your pipeline have a big impact on your sales velocity. As a salesperson, here’s what you can do to get more opportunities:
- Increase the outbound prospecting activity your sales team is running
- Invest in demand generation and brand awareness campaigns
- Create valuable, engaging content where your target audience spends time
- Improve lead scoring and routing to ensure the best leads get actioned quickly
In other words, do sales and marketing.
Raise Your Average Deal Value
When you raise your average deal size, you’ll generate more revenue on a daily and monthly basis. Try these tips:
- Use a “land and expand” model, and include the customer’s second and higher purchase in your average deal size calculation.
- Spend more of your time on higher quality, upmarket leads.
- Achieve more upsells and add-ons with dynamic pricing in your proposals.
Scott says,
If you want to increase deal size, one thing you can do is just give people the option to do so when they're signing off on the proposal. We find when there are interactive pricing tables in proposals, that gives customers the ability to opt in to the bigger package, and you can see deals grow passively just by giving them that option.
Bump Up Your Win Rate
One of the best ways to improve your sales velocity is to increase your conversion rate. Here are some tips to try:
- Identify the lead’s core goals and problems and organize the entire buying experience around them.
- Use proposal software that makes deals more likely to close with content templates and snippets, dynamic pricing, and e-signatures.
- Use account-based selling techniques like gifts, virtual event invitations, and personalized messaging.
Shorten Your Average Sales Cycle
By shortening your sales cycle, you’ll dramatically increase the average amount of revenue you’re earning each day. Here’s how:
- Let go of deals that are taking too long. You can still nurture them but move them out of your forecast and after a set amount of time with no activity from the buyer, mark them as closed:lost in the CRM.
- Identify the requirements and expectations of all decision-makers as early in the process as possible.
- Do better initial discovery to handle objections before they occur.
- Offer 2-3 pricing options that can speed up the time it takes for the customer to make a decision.
Kyle says,
When you only present one price, there's no wiggle room unless you do a lot of back and forth, and that can slow down your deal cycle.
The shorter your sales cycle, the higher your sales velocity, and the healthier your business.
Create and Send Professional Proposals
The fifth bonus factor in accelerating your sales velocity is levelling up your team's proposals. A proposal can contribute to all the other factors. Yes, even the number of opportunities.
When we've talked to customers who've adopted Proposify, a lot of times they'll say before Proposify, they were taking days, sometimes weeks to get a proposal out,
says Kyle.
Now it takes them ten to twenty minutes. Companies that are used to these long, drawn out proposal processes will often turn down opportunities because of the time it takes. But if it only takes them ten minutes to send out a proposal, why not respond to more opportunities?
Unfortunately, says Kyle,
The proposal often takes a backseat in a lot of cases. We see it as a necessary thing. But your proposal can have a huge impact on sales velocity.
For example, you can bump up your win rate with the right proposals. According to Proposify's State of Proposals, the average close rate for business deals is 20%. But when we analyzed deals sent through Proposify in 2023, we found the average close rate was nearly double that amount.
Create better proposals, and you bump up your win rate. Bump up your win rate, and you increase your sales velocity.
Speed Up Your Sales Velocity with Proposify
Proposify provides a wide range of essential features to create professional proposals that can help you gain more opportunities, raise your average deal value, bump up your win rate, or shorten your sales cycle, thereby increasing your sales velocity.
Schedule a demo today to learn how Proposify gives you end-to-end visibility into and control of your proposal process to help you close deals more quickly and efficiently.
