Velocity equals change in position over the change in time!
Wait, I think we may have a mix-up on our hands…
Thank goodness! Because nobody’s got time for a math-related meltdown today.
Anyways, we know we talk a lot about ways to always be closing. But this is not the only part of your sales process you need to be paying attention to.
It’s also essential to evaluate your sales velocity, or how quickly your deals are moving through the pipeline and generating revenue.
Because at the end of the day, it’s not just about making sales. It’s about making sales in as little time as possible.
In this article, we’ll break down everything you need to know about determining your sales velocity and ways you can improve this metric.
- How to calculate sales velocity
- The four factors that determine sales velocity
- Number of opportunities
- Average deal value
- Win rate
- Length of sales cycle
- Sales velocity best practices
- Focus on increasing effectiveness
- Increase the length of time you analyze
- Stay consistent
- How to increase sales velocity
- Increasing number of opportunities
- Boosting average deal value
- Improving win rate
- Shortening sales cycle length
- Using interactive demo software to improve sales velocity
- FAQs about sales velocity
- What is sales velocity in SaaS?
- What does high velocity mean in sales?
- Why is it important to measure sales velocity?
How to calculate sales velocity
Is your heart starting to race? Hands getting clammy? Feeling slightly nauseous?
We guessed it. These are the tell-tale signs of math-a-phobia (or the crippling fear of math).
But don’t worry. We’re here to help you overcome this math-induced fear.
Calculating this SaaS sales metric isn’t so bad once you understand each of the four parts that are used to determine sales velocity.
So, what exactly are the four factors you’ll need to calculate sales velocity? We were hoping you’d ask that very question!
The four factors that determine sales velocity
The way you calculate your sales velocity is by multiplying the number of opportunities you have by the average deal value and win rate. Then, you divide the result by the length of your sales cycle.
Here’s the formula:
Sales Velocity = Opportunities X Average Deal Value X Win Rate / Sales Cycle Length
Now, let’s take a look at each of the four pieces of the formula individually.
Number of opportunities
Essentially, the number of opportunities is how many deals you have in your pipeline for the period of time you’re looking at.
But you’ll need to make sure you and your team are on the same page about which opportunities should be included when calculating this metric.
For example, should you include only sales-qualified leads (SQLs) or both SQLs and marketing-qualified leads (MQLs)?
Average deal value
Now, you’ll need to determine your average deal value, which is the average amount that customers will spend on your product.
To do this, you’ll need to take the total value of your closed won opportunities and divide it by the total number of closed deals.
Here’s the formula:
Average Deal Value = Total Value of Closed Won Opportunities / Number of Total Closed Deals
Next up on deck is your win rate (AKA conversion rate). This tells you the percentage of leads that became customers over the period of time you’re looking at.
You can determine your win rate by dividing the number of deals you closed by the number of opportunities you had.
Just remember that depending on the sales cycle and the time period, some deals you and your team might have closed could have originated in the previous period.
And the opposite is also true. Leads that eventually convert might not sign on the dotted line until after the period of time you are evaluating.
So, this means you and your team will need to understand where any discrepancies can come from.
Length of sales cycle
This is the last part of the formula, we promise!
This metric measures the amount of time it takes for a lead to progress through your pipeline. This can vary from a few days to weeks or even months.
It’s important to optimize your sales cycle to not only keep it as short as possible, but also to help you maximize your performance and drive revenue growth.
Sales velocity best practices
1. Focus on increasing effectiveness
First and foremost, you’ll need to focus on improving your team’s effectiveness.
What do we mean by this?
When it comes to maximizing effectiveness, you’ll really need to pay close attention to how long the sales cycle is. This is because it doesn’t matter how jam-packed your pipeline is if no one is progressing or it is taking too long to get to the final stages.
Analyzing how effective your sales process is will go a long way in helping you gain insights that you can use to shorten the sales cycle going forward.
2. Increase the length of time you analyze
Another best practice when it comes to sales velocity is to analyze longer time periods.
Why? Because this will help you and your team account for different variables like abnormally long deals or seasonality.
So, we recommend calculating sales velocity over a quarter, 6-month, or 1-year time period.
3. Stay consistent
We can’t understate the importance of staying consistent when you go to calculate sales velocity.
For example, take lead qualification. At what point do you consider a lead to be a quality opportunity? Is it after they’ve filled out a form on your website? Or is it when they have scheduled a call?
That’s why you’ll need to define these factors early on and stay consistent when determining sales velocity.
How to increase sales velocity
Now, we understand how to calculate sales velocity and the best practices. But how can you actually improve your sales velocity?
Well, remember each of the different parts that make up the sales velocity formula? Good, because to increase sales velocity, you’ll need to focus on improving each of these four factors.
BTW, if you use a demo platform like Walnut, it can make it much easier to improve each part of the sales velocity formula. (But we’ll dive deeper into this in the sections below.)
Increasing number of opportunities
You know the phrase quality over quantity? Well, that goes for your opportunities as well.
Rather than only attracting the highest possible number of total leads, it’s better to focus on generating higher-quality leads.
To do this, you’ll want to pay attention to the lead generation techniques that you are currently using, and make adjustments if necessary.
Some demo platforms (cough, cough, like Walnut) allow you to send personalized demos directly to your prospects. This will go a long way in helping you boost not only your number of high-quality opportunities, but also your overall sales velocity.
Boosting average deal value
This one is all about upselling.
But this does not mean forcing a product or service on a buyer that doesn’t really need it.
Because that’s a sure-fire way to lose deals and even have customers churn.
So, this means you’ll need to try and identify all of your buyer’s pain points. Then, you can suggest other product add-ons that will address them.
On top of this, if you use a demo platform like Walnut, you can sell more with less using scalable demo templates. And this can help you boost deal value.
Improving win rate
Everybody and their mother wants to always be closing, right? But in reality, how do you make this happen?
Well, this goes back to what we mentioned before. It’s a good idea to focus on prospects that have demonstrated a high intent to buy your product.
To do this, you’ll want to pinpoint prospects that have unavoidable roadblocks that will likely prevent them from closing and remove them from your pipeline.
On top of this, you should define clear next steps for prospects and get the decision-maker involved ASAP.
Shortening sales cycle length
Shortening the sales cycle all comes down to efficiency.
Because the more efficient your team is, the faster you can close deals.
Here are just some of the ways you can make your sales process more efficient:
1. Automate manual or repetitive tasks
2. Focus on channels that are the best-performing
3. Set goals for every sales call
4. Be clear about pricing from the get-go
5. Understand a prospect’s objections before you respond to them
If you use certain types of demo platforms (hint: we are talking about Walnut here), you can also showcase your product at any point during the sales cycle, which can help you cut down time to conversion.
Using interactive demo software to improve sales velocity
We know we joke a lot here at Walnut.
(We can’t help it! It’s who we are.)
But all jokes aside, we are all trying to succeed in today’s recession. To do this, it’s all about maximizing your efficiency.
So, that means it’s essential to do everything you can to improve your sales velocity, or speed up the time it takes to move deals through your pipeline and generate revenue.
And one way to do this is by using interactive demo software (we’re hoping Walnut comes to mind here).
Some interactive demo software (cough, cough, like Walnut) let you track demo usage and use scalable demo templates. This enables you to gain insights that can be used to increase your win rate and deal value.
The bottom line is that even though boosting sales velocity takes time and involves evaluating several different factors, using interactive demo software can help you take major strides forward when it comes to reaching this goal.
FAQs about sales velocity
What is sales velocity in SaaS?
In short, sales velocity is a metric that gauges how quickly deals move through your pipeline and generate revenue.
What does high velocity mean in sales?
When you have a high sales velocity, that means you’re generating more revenue in less time. And this is what optimizing your SaaS sales strategy is all about.
Why is it important to measure sales velocity?
It’s critical that you and your sales team track sales velocity so you’ll be better able to determine how long it takes for your company to make money.
Ready to start improving your sales velocity? Book a meeting with us now by clicking that big “Get Started” button on the top of the screen.