By Baillie Ward
Velocity is a key metric in a B2B organization.
By understanding how quickly accounts move through your funnel, you can more effectively forecast, make revenue projections, and optimize your sales process.
There are a few ways to measure sales velocity (sometimes referred to as pipeline velocity):
- Total time spent from opportunity creation to close date
- Total time spent in each opportunity stage
- How much value new customers provide over a given period
Use this formula to calculate sales velocity:
Velocity = (# of Opps x Avg. Deal $ x % Conversion Rate)/ Avg. Conversion Time [in days]
Let’s say you get an average of 100 new opportunities a month with an average deal size of $10,000 at a 15% conversion rate (conversion = new customer). Your average sale takes 2 months (60 days) to close.
(100 x 10,000 x 0.15)/60 = $2,500
With this formula, you’re working with a sales velocity of $2,500 in potential revenue per day.
At Terminus, our finance team will measure sales velocity across various segments (e.g. small business, mid-market, enterprise) for a more accurate picture of how quickly deals are moving in different market segments.
You can monitor cohorts for changes in sales velocity over time to measure the impact of product updates or pricing changes. You can also segment out your audience to measure velocity across specific audience segments (such as industry rather than company size). If you can find a way to close deals faster in key audience segments, you can boost your sales velocity.
According to SiriusDecisions, the average sales cycle length has increased 22% over the past five years due to more decision-makers involved in the B2B buying process.
Why should you care?
Beyond the obvious answer (closing large deals faster = more revenue), increasing your sales velocity just makes good business sense:
- Shorter sales cycles require fewer resources because you spend less time developing the sale
- You don’t have to worry about a competitor swooping in and taking the deal
- You don’t have to struggle to keep the momentum until ultimately ending up with a “no decision” loss
So how can account-based marketing help with this?
Identify and target high-velocity segments
Sure, you might know your velocity across individual market segments, but how are you using that information? Outside of revenue operations, velocity data can – and should – be used to make informed decisions when strategizing.
Sales and marketing teams can work together to identify segments with the best (or worst!) velocity and find ways to drive faster sales and higher conversion rates in each segment using ABM.
Example: Productry is a SaaS company that services companies in the Retail, Hospitality, and Consumer Packaged Goods space. The Productry team primarily works with mid-market and enterprise organizations. After calculating the velocity across their three main verticals, they realize their velocity in the Retail vertical is 33% lower but has a much higher-than-average ACV. If sales and marketing can find a way to boost velocity in that vertical, it provides a huge revenue opportunity. The teams join forces to cherry-pick a small number of key accounts in the Retail space and identify the …read more
Read more here:: B2CMarketingInsider