Have you ever asked a potential employer which sales metrics they value most in an interview? The answer is probably, "Yes."
But have you ever asked them about their sales velocity? If you have, you likely know that this calculation is key to understanding a sales organization’s growth mindset and overall health.
If sales velocity is new to you, now is a good time to learn about it. Knowing this metric can help you go beyond basic KPIs and make a great impression on your current or future manager.
So, what exactly is sales velocity?
What is Sales Velocity?
Sales velocity measures how quickly a potential customer moves through the sales process and generates revenue. It shows both the productivity of a sales team and any areas that could be improved in the sales process.
Sales velocity also helps with sales forecasting. By knowing how often and how fast customers make purchases, businesses can better predict future revenue. This helps companies plan their budgets more accurately based on expected profits and losses.
What’s the Difference of Pipeline Velocity and Sales Velocity?
Sales velocity is sometimes called pipeline velocity or sales funnel velocity. These terms all mean the same thing: they measure how fast prospects move through the sales process.
Your company can choose the term it likes best. Some prefer "pipeline velocity" because it’s direct—prospects are moving through a pipeline. But the name isn’t as important as the final number you get from the formula.
What’s the Difference Between Inventory Velocity and Sales Velocity?
Inventory velocity shows how well your company manages its stock and how fast products sell.
This metric is important for supply chain managers, retailers, and merchandisers. It helps them keep enough products available and improve logistics.
Sales velocity, on the other hand, measures how fast your company earns money from sales. Inventory velocity shows how quickly you need to restock items.
Keep in mind, that inventory velocity only matters for companies that sell products. Service-based businesses don’t need to focus on inventory.
The Four Parts of Sales Velocity
1. Number of Opportunities (#)
An opportunity, or qualified lead, is a chance for a salesperson to make a sale. The more opportunities a sales team has, the more chances they get to close deals and bring in revenue.
2. Average Deal Size ($)
The average deal size is the estimated amount of money each opportunity will bring in when it closes. Bigger deals mean more revenue with each sale.
3. Win Rate (%)
Win rate measures how often the sales team closes deals. A higher win rate means more successful deals, which boosts sales velocity.
4. Sales Cycle (L)
The sales cycle is the average time it takes to close a deal. A shorter sales cycle means sales teams can generate revenue faster, improving sales velocity.
Sales Velocity Formula
Calculating sales velocity is straightforward if you know the parts and have an established pipeline.
Using qualified leads, rather than all leads, makes this metric more accurate. Qualified leads have been reviewed and show a good chance of becoming customers.
The criteria for a qualified lead may vary by business, but it often includes:
- Demographics
- Firmographics
- Budget
- Decision-making authority
- Pain points
- Expressed interest
To qualify leads, businesses usually gather details through lead forms, calls, or surveys to assess how well each lead fits and its potential value.
Why Is Tracking Sales Velocity Important?
Sales velocity shows how quickly your team generates revenue. A higher sales velocity means more money is made in a shorter time.
It’s clear why this is important. If your team can’t generate revenue fast enough, the business might struggle and eventually fail.
But sales velocity isn't just about money. It gives a deeper look into the sales process and helps in several ways:
- Pinpoints areas of strength and problem spots in the sales process.
- Shows where individual sales reps need training or coaching.
- Helps create accurate sales forecasts, which improves goal-setting and supports investor confidence.
In short, tracking sales velocity can explain why some teams succeed and others don’t.
Sales velocity is a powerful measure of the team’s overall health and performance. However, it’s influenced by four main factors, and changes in any of them can affect the outcome.
What are the Ways to Increase Sales Velocity?
Most sales teams aim to increase sales velocity. After all, a higher velocity means more revenue. Here’s how to boost it.
Add More Opportunities
To increase velocity, you need to win more deals. The first step is to bring more qualified leads into the pipeline.
But remember, lead quality matters more than quantity. Many teams find that getting qualified leads is one of their biggest challenges.
To solve this, develop detailed Ideal Customer Profiles (ICPs) and buyer personas. This helps attract the right leads from the start. By filling your pipeline with prospects who fit these profiles, you’ll see an increase in opportunities.
Tip: Use data-backed strategies to fill your pipeline and close more deals.
Increase Deal Value
Growing your average deal size starts with fair pricing. Make sure your pricing reflects the value you offer. Taking a value-based selling approach can help here.
Map your product benefits to customer pain points. When you address customers’ specific needs, your offer becomes more valuable to them. Try these tactics to increase deal size:
- Create tailored sales pitches.
- Balance resources between large deals and smaller, quick wins.
- Focus on cross-sells and upsells with current customers.
All of these methods build genuine, trusting relationships with your prospects.
Enhance Conversion Rates
To optimize conversions, examine your sales pipeline for what works and what doesn’t. Identify what helps prospects convert quickly and what causes them to leave the funnel.
Conversion rates also reveal how well leads are being qualified. If conversions are low, you may need to attract better-fit leads. Look at the conversion rate for each stage in the pipeline to get a clear picture.
Speed Up the Sales Process
A shorter sales cycle means quicker revenue. Here are some quick steps to improve it:
- Make sure reps follow up quickly. Fast follow-ups increase the chance of closing deals.
- Have relevant content ready to share during follow-ups.
- Most prospects need at least one follow-up before buying, with some needing 4 or 5. Many reps stop after the first try, so encourage persistence.
Using the right technology, like a well-adopted CRM, can also help streamline and shorten the sales cycle.
Gaining Practical Insights from Sales Velocity
Calculating sales velocity is easy, but understanding it can be tricky. Here are some ways it can shape your strategy:
Sales Coaching
If a rep’s sales velocity is low, it may signal the need for extra training. When several reps struggle in certain areas, it might point to a need for better resources across the team.
However, a common mistake is coaching reps solely on sales velocity. Setting goals to “raise sales velocity” is ineffective since it depends on many factors—like lead volume, deal size, and sales cycle length—that may be beyond a rep’s control. Pressuring reps to increase velocity can also lead to inflated lead counts or deal values, skewing forecasts.
Instead, coach on specific behaviors and skills that can improve velocity components:
- Share methods for finding high-quality leads early on.
- Review key conversation techniques to ensure reps ask questions that uncover customer needs.
- Encourage upselling and cross-selling to increase deal size.
- Assess how reps conduct demos and if they consistently show value at each stage.
Client Success
If your sales velocity is high, it’s a reminder to check your customer support capacity. A high velocity might mean your front-end team is well-staffed, but your support team could be stretched thin, making it harder to retain customers.
This is common for growing companies, which often prioritize sales over retention. If you’re focused on increasing sales velocity, first ensure that your customer retention rate is strong. Is it where it should be?
Sales Process
A low sales velocity can point to bottlenecks in the process. It may not be the reps’ skills or market demand. It could be that your sales process is inconsistent, your software is clunky, or a lack of automation is wasting time and resources.
These roadblocks can slow the sales cycle and lower overall velocity. Consider these solutions:
- Review each stage of the sales process for different market segments (like customer size or location).
- Upgrade your sales tools, such as pipeline management or CRM software.
- Track daily activity metrics to spot where time is being lost and where improvements can be made.
Hiring
Sales velocity can also help identify when to expand the team. A low sales velocity may indicate a simple lack of manpower. If the team is too small, there are fewer leads to chase and close.
An overworked team may experience declining win rates and fail to meet quotas, which can hurt morale. If sales velocity is lagging, it might be time to bring in more salespeople.
Conclusion
In conclusion, tracking sales velocity can make a big difference for any sales team. It shows how quickly your team turns opportunities into revenue and points out strengths and areas to improve.
By focusing on the four key parts—opportunities, deal size, win rate, and sales cycle—you can find ways to keep the momentum going and earn more in less time.
Whether you’re working on lead quality, speeding up follow-ups, or supporting customers consistently, boosting sales velocity leads to better sales results and steady growth.
