Using the Sales Velocity Equation to Drive Sales

Every sales team across the world wants a magic formula that will allow them to substantially increase their sales, and some are aware that this formula (or equation) already exists. An equation that takes the four factors that are impacting how much you sell and turns them into a mathematical directive.

This is called the Sales Velocity Equation and it’s unimaginably simple to comprehend and put into practice. The Sales Velocity Equation is universal and is made up of the following four functions:

A. The quantity of new sales opportunities

B. The average value of your sales deals

C. The sales win rate

D. The sales cycle length

The functions of A, B and C are added together and divided by D to give you your Sales Velocity.

Essentially, you need to increase the values of A, B and C while reducing the value of D. So, you want more opportunities with higher average deal values and a higher win rate percentage with a reduced sales cycle length, in order to increase your sales velocity.

For instance, say you increased your sales opportunities, average deal value and win rate by 10% and then reduced the sales cycle length by 10%; you’ve just increased your overall sales velocity by 47%.

Let’s stop for a moment to think about which of the four sales velocity values you spend the most time focusing on. Which one gets more attention, has a higher KPI value and is most often cited in performance reviews?

Surveys from sources such as Salesforce show that a large majority of business sellers have a tendency to focus a huge chunk of their time and effort on the quantity of new opportunities, rather than trying to maximise returns from existing ones. It’s commonly seen in the world of sales for the acquisition of new leads to be the main (and sometimes only) objective – but is that the best way forward for your business?

There is a problem with focusing on only that one factor. While it is an important factor in the sales velocity equation, spending all of your time on it gives you little time to focus on the other three aspects. Filling up the pipeline is all well and good, but when you spend little or no time maximising the value of those deals, winning deals on leads you currently have and reducing the sales cycle time – it can adversely affect your sales velocity.

It’s often the most highly coveted aspect of the equation, and management and director-level types will focus on questions like “How many calls have you made?” and “How many leads did you get this week?”, causing everyone to neglect the other components.

It doesn’t help that, from the perspective of the salesperson, acquisition of new leads is the easiest thing out of the four to do, and requires little effort or expertise.

The acquisition is the first step in the pipeline, so we’re not saying it’s not important. However, imagine for a moment that you didn’t make as many calls, reducing the quantity, but instead focused on the quality of the calls, giving you higher win rates, higher average values and reduces sales cycles.

Here are few ways you can do this effectively:

– Try to focus on deals that you have a chance of winning. Too often leads are added for the sake of KPIs that have little or no chance of being won.

– Try to challenge prospects to discover how value can be added to a deal with them; this can remove price sensitivity and increase the average deal value.

– Ask tough, challenging questions to the customer that help you better understand their individual and company buying process and policy and try to gain access to high-up decision makers. This allows you to better align your sales activity and method to them, increasing your win rate.

It’s understandably important to be constantly adding new opportunities into the pipeline, but what if you step back from that for a second and focus on other areas? Does your sales velocity suddenly halt? Do you lose all momentum? Well, no, not necessarily.

Let’s apply the sales velocity equation again, but this time we’ll assume that the number of opportunities remains the same while the average deal value and your sales win rate is increased by 10% and the sales cycle length is reduced by 10%. Your sales velocity increases by 34% under these circumstances, proving that new opportunities aren’t the only way to improve the sales velocity.

So, perhaps it’s time to take a look at the opportunities you already have in your pipeline and spend some quality time trying to nurture them so that the other factors improve. Just achieving more new opportunities will give you a much lower result than nurturing your existing leads to improve other factors at the same time.

The sales velocity equation works best when all factors are seen equally and are worked on in unison. Neglecting one or more values for the sake of another may not be you putting your best foot forward.

Remember: get new leads and try to improve the win rate, increase the average values and reduce the sales cycle with each person you speak to and every lead you get, to really improve your sales velocity.