How to Improve Sales Velocity and Increase Revenue Growth
- Sales velocity shows how sales process effectiveness translates into revenue performance. Tracking velocity before and after process improvements shows which changes are making a difference and which are not.
- Even when selling velocity declines, which means it's taking longer to bring in revenues, this metric highlights which of the underlying variables is most responsible so quick and precise course corrections can be made.
- This metric can also be projected forward to see if you are going to make the sales target. And if not, what adjustments or levers will most help.
Achieving revenue growth doesn't occur by chance, it happens by design. And that design starts with the right measurements.
Selling velocity shows the speed at which the company makes money. It's kind of like a car's speedometer that shows you how fast you are moving and projects when you will get to your destination. Only this metric shows have fast you are bringing in revenue and when you will reach your sales target.
But more than just showing how much revenue you earn in a day or can expect to make over a period of time, it shows the most influential variables that affect the company's revenue generation. It can thereby can be manipulated or improved to accelerate revenue growth.
Sales velocity is equal to the number of sale opportunities times the average opportunity value times the win rate, divided by the sales cycle duration.
It's an important revenue metric because it shows the intersection of time and money. It's influential in planning company growth, cash flow requirements and making investment decisions. It's impactful in determining where to make performance adjustments and realize the biggest revenue gains. It directly aligns the company's goal of revenue growth with the operating factors that directly affect that goal.
How to Improve Sales Velocity
Increasing velocity means your bringing in more revenue in less time. Improving this metric lowers your cash requirements, accelerates revenue and increases profits.
A simple review of the selling velocity formula shows how to achieve an improved result. You can increase the numerator, decrease the denominator or both. However, that's too abstract to be helpful. Instead you need to examine each of the variables with an eye toward improvement actions.
The first variable measures the number of sale opportunities in the pipeline.
The first step to improve this variable is to focus less on quantity and more on quality. A smaller volume of good leads is far more valuable than a large pipeline of poor or mediocre leads.
Excluding unqualified leads, stalled opportunities or dead deals will leave you with a volume of sales-ready opportunities that can be worked and closed. Otherwise, this variable is being inflated with work that will consume lots of time but not deliver payback.
Identifying and removing non-qualified sale opportunities from the pipeline will reduce the opportunity count but increase the win rate and deliver an overall positive impact.
Other techniques to improve sale opportunities include lead scoring, structured qualification checklists, and opportunity scoring.
Average Opportunity Value
The average opportunity value is the factor that makes selling velocity a financial figure.
For some industries such as retail, communications and financial services the methods to improve this variable include things like up-sell, cross-sale or bundles. For most B2B industries, improvement methods include things like tailoring your unique value proposition too each customer's specific pain points and managing discounts.
If your solution earns an annuity revenue stream, such as SaaS, you may choose to use customer lifetime value instead of an average subscription amount.
Sales Win Rate
The win rate measures the number of sale opportunities that are won.
Improving this measure starts by analyzing your selling cycle. You want to identify the stage to stage conversion factors to highlight the steps where opportunities are stalled or terminated. You will likely want to compare data by rep or product line to find the weak spots to prioritize and fix.
Selling losses are highly indicative of poor qualifications. As mentioned previously, disqualifying prospects early saves tremendous time and allows reps to double down on legitimate customers and improve the sales win rate.
For most B2B companies, the two most significant steps to improve the win rate are to apply a sales win plan to every opportunity and adopt a strategic sales methodology. Shifting from what you sell to how you sell is proven to deliver significant and sustained improvements to sales conversions.
Sales win rate is a powerful factor. Even small improvements in win rate deliver significant impact to revenue and sale velocity.
Sales Cycle Duration
This figure is the average number of days to convert a prospect into a customer.
To improve this factor, you need to look deeper than the total sales cycle elapsed time and analyze the stage to stage time durations. In my experience I almost always find that one selling stage sticks out and further diagnosis surfaces bottlenecks and incomplete processes that deliver a negative impact to the entire sales cycle.
Don't try to improve multiple selling stages at the same time. Instead, focus on the stage with the most delays or bottlenecks, and when done, move to the next.
The single biggest impact to improve sales cycle duration is to apply a prescriptive and repeatable sales process. Structured selling processes lead prospects through their purchase cycle. They are proactive instead of reactive. And maybe best of all, they can replicate the behaviors and actions of the top producers so the rest of the team can achieve similar results. Sales playbooks are the best tool to bring prescriptive guidance and automation to each of the steps in the sales cycle.