What is Sales Velocity?
Sales Velocity is a measure of how quickly deals are moving through a company’s sales pipeline. It provides insights into how much revenue a company can expect within a certain timeframe.
Sales Velocity is calculated by multiplying the number of opportunities (qualified leads in your pipeline), average deal size $, and conversion rate, then dividing by the length of the sales cycle. In the SaaS context, a higher Sales Velocity means your company is effectively turning leads into customers and doing so at a fast pace, leading to increased revenues.
Why It Matters
For SaaS CEOs and CMOs, Sales Velocity offers a snapshot of the company’s sales health. It helps identify bottlenecks in the sales process and opportunities for optimization. It’s an essential metric for planning, forecasting, and managing growth.
A common misunderstanding is that Sales Velocity only focuses on speed. However, it also takes into account other crucial factors such as the number of deals, deal size, and conversion rate.
Frequently Asked Questions
- How can I improve Sales Velocity?
Shortening the sales cycle, increasing the deal size, growing the number of opportunities, or improving the conversion rate can help increase Sales Velocity.
- Why is Sales Velocity important in SaaS?
In a subscription-based model like SaaS, efficient sales processes and quick deal closures are critical for revenue growth. Sales Velocity provides insights into these aspects.