Have you ever been in a car and watched the speedometer? It tells you how fast the car is moving.
Now, what if I told you that businesses have a similar tool, but instead of measuring speed, it measures how fast they make money?
It's called "sales velocity." Just as you'd want a car to go faster to reach places sooner, businesses aim for higher sales velocity to earn cash quicker.
In this article, find out why sales velocity matters, how to calculate it, and how you can increase it for your business growth.
Sales velocity indicates how rapidly a business makes sales, aka how quickly they earn money.
If you understand how fast your business is running (or, in this case, selling), you can make better decisions, such as how to speed up or where to invest more resources.
Imagine you're selling software. To determine how fast you're selling app seats (aka your sales velocity), consider these four pillars:
How many people are interested in buying your software? This isn't about everyone you meet but the ones genuinely considering a purchase.
#2 Average deal size
When someone buys a plan, how much do they usually spend? This number increases if they often buy more than one seat or pick the pricier plan.
#3 Win rate
Out of 10 people showing interest, how many buy? If 6 out of 10 purchase, your win rate is 60%.
#4 Sales cycle duration
From the moment someone eyes your app to the point they buy it, how long does it typically take?
With these elements, sales velocity is calculated as:
(Number of Opportunities x Average Deal Size x Win Rate) ÷ Sales Cycle Duration
For example, if your
- Opportunities are 120 people
- Average deal size is $25
- Win rate is 50% or 0.50
- Sales cycle duration is 5 days
You will calculate your sales velocity as (120 x $25 x 0.50) ÷ 5 = $300 per day
The result? You're raking in $300 daily from your app sales.
To boost your sales velocity, you have to increase:
Average deal size
.. and shorten:
To help you out, we're sharing the 4-step multichannel framework that will get you 17-30%+ reply rates!
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✓ Sales velocity doesn't just measure sales but the rate at which they occur. Speed is the game-changer.
✓ Opportunities, average deal size, win rate, and sales cycle duration are the driving factors. Understand them, and you master your sales velocity.
✓ Knowing your sales velocity isn't enough. Constantly aim to improve it - check out this 45-min pure value video & revolutionize your outreach!
So, next time you assess your sales performance, don't just count the dollars. Measure how swiftly they come in and double down on things that speed up the process!