Sales velocity is a measurement of how fast you're making money. It looks at how quickly leads are moving through your pipeline and how much value new customers provide over a given period. A sales velocity equation uses four metrics (number of opportunities, average deal value, win rate, and length of the sales cycle) to determine an organization's sales velocity and how much revenue they can expect to generate over a specific period.

Why is it important to track Sales Velocity?

Sales velocity plays a huge role in your business' ability to thrive and grow. Higher sales velocity means you're bringing in more revenue in less time. Tracking sales velocity over time allows you to benchmark your own sales velocity against other teams, compare the effectiveness of individual reps or regions, and see how changes to the sales processes impact your business, for better or worse. Understanding sales velocity can also help you forecast more accurately and determine how your sales process can be optimized for faster sales and higher conversion rates at each stage.

How to measure Sales Velocity?

To accurately calculate an organization's sales velocity, start by separating small, mid-market, and enterprise pipelines. Your company likely has its nuanced definition of what constitutes each of these segments and you should divide them accordingly. Once you've divided your market segments, run a sales velocity equation for each one.

Sales Velocity Formula:

Sales Velocity = (Number of Opportunities x Deal Value x Win Rate) / Length of Sales Cycle.

Example: Let's say your business has 50 opportunities, an average win rate of 25%, an average deal size of $10,000, and a sales cycle that typically lasts 60 days. Here's how you could use the formula to determine sales velocity:

Sales velocity = (50 * 0.25 * $10,000) / 60

= $125,000 / 60

= $2083.33

This tells us that your sales velocity is $2083.33, which means you're bringing in roughly that much revenue each day. Knowing this, you can either strive to increase the numerator (in this case, $125,000) or decrease the denominator (60 days) - or both, if possible.

Number of Opportunities: Your pipeline always contains a certain number of opportunities. Make sure they're qualified opportunities. To boost sales velocity, focusing more on the quality of leads rather than quantity is important. If your pipeline is packed with bad leads and only a few that have a chance of closing, your bottom line will suffer.

Deal Value (Average Deal Size): Every deal requires both parties' most valuable resource: time. Make sure you're maximizing this resource for your prospect and yourself by introducing offers or add-ons to make your prospect's life better while increasing your average deal value and increasing your sales velocity.

Win/Conversion Rate: Your average win rate is tied to your attainment of quality leads. To identify your win rate, divide the number of sales won by the total number of sales opportunities. Improve your win rate by capturing and nurturing high-quality opportunities like referrals or prospects who've already demonstrated high intent to buy.

Length of Sales Cycle (in months): This is the only factor in sales velocity which you want to decrease. The less time it takes for prospects to move through your pipeline, the faster you close a deal. Creating a more efficient sales process, redefining your sales playbook, and sometimes adding headcount to your sales team are all ways to shorten your average sales cycle and close more quality deals faster.