Your sales team needs to move fast if you want to hit targets. And analyzing how quickly customers move through the sales pipeline — or where they stall — can identify things that are working well and areas that need improvement. That’s why measuring sales velocity is critical.

Below, we explore how to track sales velocity and rev up your sales team’s productivity for faster conversions.

What you’ll learn:

• What is sales velocity?
• Why it’s important to track sales velocity
• How to calculate sales velocity
• Sales velocity example
• 4 things you can do to increase sales velocity

What is sales velocity?

Sales velocity shows the rate at which leads are progressing through your sales funnel, generally measured by revenue generated in a specific period of time. It uses four metrics to calculate this: number of opportunities, average deal value, win rate, and average length of sales cycle. (More on how these fit together below.)

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Why it’s important to track sales velocity

Monitoring your sales velocity helps you accurately track the time it takes for your team to close deals. This can reveal potential roadblocks in your sales process which can jeopardize sales targets.

If you find roadblocks, you can examine each phase of the customer journey to identify barriers and strategize ways to improve. You can also use sales velocity to monitor inventory, so you know exactly when to reorder, keeping internal processes running smoothly.

Knowing your sales velocity is an important part of accurate sales forecasting. If you know how fast your team is generating revenue, you’re in a better position to project future revenue, adjust your strategies, and appropriately allocate resources. Used in tandem with revenue intelligence, sales velocity can uncover risks and opportunities in deals throughout the sales pipeline.

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How to calculate sales velocity

The equation for sales velocity takes these four variables into account: opportunities, average deal value, win rate, and the length of the sales cycle. If you’re using a CRM like Salesforce, these metrics are tracked automatically and are readily available.

To calculate sales velocity, multiply the number of sales opportunities by the average deal value and win rate. Then, divide that result by the length of the sales cycle. The sum represents the revenue you can expect to bring in throughout the sales cycle.

Here’s the formula:
(Opportunities x Deal Value x Win Rate) / Length of Sales Cycle = Sales Velocity

Here are the metrics in more detail:

1. Opportunities: This is the number of qualified leads in your pipeline during the period of time you’re measuring. Of course, you’ll want to focus on sales-qualified leads (SQLs) specifically. Without a doubt, these are your most likely-to-convert leads.
2. Average deal value: This is the average revenue you generate from new customers over a set period of time. To find your deal value, divide your generated revenue by the number of deals closed. For example, if you bring in $100,000 in revenue during a quarter from 50 sales, your average deal value would be $2,000. ($100,000/50 = $2,000)
3. Win rate: Also known as conversion rate, the win rate is the percentage of leads that turned into paying customers during the period of time you’re measuring. To calculate your win rate, divide the number of deals won by the number of opportunities. As an illustration, if you close one out of four leads over a sales quarter, your closing ratio is 25%. (1/4 = 0.25 or 25%)
4. Length of sales cycle: This refers to the average length of time that it takes for a qualified lead to become a paying customer. This journey through the sales pipeline can take days, weeks, or even months. To calculate the length of a sales cycle, add up the total number of days that it took to close each sale in the time period you’re considering. Then, divide that sum by the total number of deals. For example, if you closed three deals in a week, including one in two days, one in four days, and one in six days, the length of your sales cycle would be four days. (2+4+6 =12) / 3 = 4

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Sales velocity example

Now, let’s look at an example of the full sales velocity formula in practice:

Joe’s sales team specializes in SaaS subscriptions. He wants to calculate his team’s sales velocity from last quarter. They had an average of 150 leads in the pipeline. The average deal during that time was $1,000. Over the past quarter, the team’s average win rate was 0.25%. The length of the sales cycle, or the typical amount of time it takes to convert leads into paying customers, was a month or 30 days.

The formula for the team’s sales velocity looks like this:

(150 x $1,000 x 0.25) / 30 = $1,250 per day

This means that Joe’s team is bringing in $1,250 x 90 days (the length of a quarter) or $112,500 per quarter.

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4 things you can do to increase sales velocity

You understand how the sales velocity formula works. You know why it’s essential to improve your profits. Now that you’re ready for the races, here are four ways to boost your team’s sales velocity:

1. Build your brand

Becoming known in your industry on platforms like LinkedIn can have a huge impact on your sales velocity. As we’ve seen from influencer marketing, people are more likely to buy from someone they trust, so if you can build rapport with potential customers online, it can often cut down on the time it takes to move through your sales cycle.

If you’re new to brand building, think about how you want to position yourself and then create supporting content to share with your audience. This could be video content, thought leadership articles, webinars, and more. Anything that shows off your personality and draws people in will encourage connection.

People want to get to know you and understand what you’re about before doing business with you. As noted earlier, using social media and other public-facing touchpoints is a chance to connect with prospects on a personal level and humanize the interaction.

2. Generate more high-quality leads

Not all leads are created equal. Fewer high-quality leads, as opposed to a ton of unqualified leads, can still increase your sales velocity if they make it through your sales cycle quickly. For this reason, you want to make sure that you’re tracking and focusing on qualified leads. And to get more of them, you need opportunities to connect with prospects.

You can do this by cold calling, creating a referral program, or via good old-fashioned networking. That might man getting out of the office and heading to an event or prospecting on social media. However, you may need to update your buyer personas or tweak your prospecting strategy. That way, you can make sure you’re going after the best leads right off the bat.

Additionally, once customers make a purchase, it’s about continuing the relationship with them to encourage repeat business, referrals, and brand champions.

3. Increase average deal size

This doesn’t necessarily mean increasing the price of your products or services. Instead, think about upselling or cross-selling. Adding product bundles or offering several related products or services together at one price can help increase your deal size and, therefore, your sales velocity.

4. Improve win rate

Improving your win rate can go a long way to increasing your sales velocity. To narrow the gap between your wins and losses, try:

• Prioritize likely-to-close leads: Your time is better spent nurturing the relationships you already have with leads you know are interested, rather than starting from scratch. Work with your marketing team to come up with effective strategies to qualify leads, so you can hit the ground running once they’re in your pipeline.
• Be empathetic: Empathy is essential to closing sales. Actively listen to prospects to better understand their pain points. Instead of focusing on just selling a product or service, think of yourself as a problem solver who can alleviate challenges in your customers’ lives.
• Anticipate objections: Be prepared for objections or concerns that your prospects may have. For example, you can be ready with thoughtful answers that put their minds at ease and position your product as a solution rather than a sale.
• Rev up your workflow with a CRM: Cloud-based customer relationship management (CRM) software like Sales Cloud makes it easier for your team to find, track, and connect with customers to close more deals in one, streamlined place. Use it to uncover data-driven insights to improve slower areas in your sales cycle where prospects may be stalled.

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Increase speed while retaining strong relationships

Life moves fast, especially in sales. And the faster you can move customers through your sales pipeline, the faster you’ll see your revenue increase. Monitoring your sales velocity will go a long way toward improving your team’s productivity, win rate, and financial goals. Just remember not to jeopardize relationships as you speed up your sales efforts.