The Sales Velocity Equation: Solving to Win
Sales velocity defines the amount of time it takes for a new lead to complete as a closed deal. Sounds easy when you put it that way, doesn’t it?
When I first researched the details of the sales velocity equation, the concept irritated me. The thought of reducing a time consuming, hard-earned sale to a simple math equation completely frustrated me. After all, there are many soft skills that contribute to a successfully closed deal as well. Here’s the equation:
However, the more I think about it though, it actually makes perfect sense. Still not onboard yet? Let’s break it down.
There are four areas that contribute to a teams’ sales velocity. These include:
- (A) The number of sales opportunities
- (B) The average deal value
- (C) Your win rate
- (D) The length of the sales cycle
Donal Daly, from Altify, formerly the TAS Group, wrote about how to make sure your sales velocity is functioning positively, he asserts that “you want to increase A, B, & C while reducing D.” I’m by no means a math whiz, but general algebra tells us that solving this equation successfully will lead to an increase in sales velocity. Meaning more deals closed. Score!
Pump the brakes, though. Before we rejoice in discovering the hidden secret to winning all the sales, let’s take a step back. To make this equation work for your business, it’s necessary for you to look closely at these four areas and ask yourself – where do you spend most of your time?
Don’t put all your eggs in one basket
If you don’t get anything else from this blog post, please understand this: The sales velocity formula is delicate. Meaning, a sales person can slice and dice it in the way that makes sense for their quarter and their objectives. Also meaning, don’t focus on one part of the formula solely.
For example, it’s very common for sales teams to focus most of their attention on improving their pipeline. That’s not necessarily bad, either. However, this creates a problematic situation: If most salespeople are solely focused on bringing new opportunities in, then they’re not focused on how to maximize the return on opportunities they already have, or even how to reduce the length of the sales cycle.
Consider, for a moment, if you removed a portion of your equation. Would your sales department face ultimate failure?
Remember, the sales velocity formula is delicate. It requires sales teams to fully understand their current pipeline, their future goals, and how they are going about closing the deal.
How do you use the sales velocity formula? Share with us by tweeting @Xactly and #salesvelocity.
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