Why Sales Velocity is becoming increasingly important

Introduction

The term Sales Velocity is now being used more widely to understand the various elements in the sales process from Lead to Close of sale and its impact on the bottom line per annum.

My own focus is this: How fast an Opportunity will move through the Buying Cycle, resulting in higher sales, all other things being equal.

The equation is: Sales Velocity per annum (£) or the Total Amount of Sales annually = No. of Opportunities x Conversion Rate x Average Deal Value x (Year/ length of time in Buying Cycle).

An example:-

You have generally 10 deals in your pipeline at average value of £1000 x 30% conversion rate and 120 days in selling cycle. Sales Velocity =£109000 per annum.

We can look to improve on all these elements, but the focus in this post is how we shorten the Buying Cycle.

If this cycle was reduced 90 days, then our Sales Velocity increases to £137000, a 25% increase.

Most Sales Managers understand the need for more Leads, more Opportunities and better Conversion Rates, but may not fully appreciate the importance of the “Days in Buying Cycle” and how this impacts.

Sales Opportunity Stages

From our CRM system or just anecdotal evidence we are likely to know for a type of sale, the average duration in Buying Cycle. Sales focussed organisations will measuring and reporting on where a Sale is at a particular Stage. Typical Stages may be:-

1. Lead
2. Qualification and Book Appointment
3. Demonstration
4. Proposal
5. Negotiation and Further discussions
6. Close and Order Signed

CRM systems have in-built Opportunities Stages, so when a Sales Manager reviews their Sales Pipeline, they will be looking at the List of Opportunities, sorted by Sales Person, by Stage and by Month to expected Close.

Sales Management want to see an Opportunity moving through the stages and maintaining momentum. If they measure the Buying Cycle at all, typically it will be “Total Number of Days” an Opportunity is open from its creation to its Close. In my experience, it is still unusual to measure the Duration within in each Stage.

Using Sales Velocity as a tool means you do need to measure the "Stage Duration Time" and your CRM may require some customisation to be able to do this.

Why is “Buying Cycle” important?

In this post, we are looking at Buying Cycle and time spent at Each Stage, since when we know or estimate this Stage Duration, we can now work on ways to shorten this by making improvements in each Stage with the effect of moving our sales though faster.

Focusing on Buying Cycle improvements is about managing the Sales Pipeline more effectively and giving sales people the tools and skillsets to see and understand this process and its impact.

Stage Duration is a great place to start since it means that no additional marketing monies need to be spent on sourcing more Leads, since this reviewing process is about effective Sales Management and utilising CRM to better understand how and where you can improve each Stage.

Why we concentrate on Buying Cycle first is covered in more detail in our Blog, where we have a downloadable ebook illustrating how this process works using Pipeliner CRM.

One of the keys here is you need to look to look at and adapt your CRM system to measure these Stage Durations. Your CRM system has the information available, but it may just need tweaking to measure these Durations.

Reducing Buying Cycle Time can be a useful process for increasing Sales Velocity for a relatively small investment and most likely all the information you need is already in your CRM system.