Sales velocity: Why it matters & 4 tips to increase it
Posted: Tue Dec 03, 2024 10:44 am
In any race, you typically track your progress by beating your time marks.
In business, you can also track how fast you make money.
This business stopwatch is called “sales velocity.”
Just as you’d want to reach the finish line first, businesses aim for higher sales velocity to earn cash quickly.
Find out why sales velocity matters, how to calculate it, and armenia phone number list how you can increase it for your business growth.
What is sales velocity, and why does it matter?
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.
How to calculate sales velocity
Imagine you’re selling software.
To determine how fast you’re selling app seats (aka your sales velocity), consider these four pillars:
1. Opportunities
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
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An example of calculating sales velocity
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 would 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.
4 tips to increase your sales velocity
To boost your sales velocity, you have to increase:
Average deal size
Work on pushing lifetime deals or annual subscriptions rather than simply going for the smaller products.
The number of opportunities
In business, you can also track how fast you make money.
This business stopwatch is called “sales velocity.”
Just as you’d want to reach the finish line first, businesses aim for higher sales velocity to earn cash quickly.
Find out why sales velocity matters, how to calculate it, and armenia phone number list how you can increase it for your business growth.
What is sales velocity, and why does it matter?
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.
How to calculate sales velocity
Imagine you’re selling software.
To determine how fast you’re selling app seats (aka your sales velocity), consider these four pillars:
1. Opportunities
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
__wf_reserved_inherit
An example of calculating sales velocity
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 would 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.
4 tips to increase your sales velocity
To boost your sales velocity, you have to increase:
Average deal size
Work on pushing lifetime deals or annual subscriptions rather than simply going for the smaller products.
The number of opportunities