by Steve Rietberg | November 15, 2019 | Comments Off on Sales Velocity: Improving on a Classic Metric
I was recently asked whether sales velocity is a good measure of sales performance. My answer was not a simple yes or no. Sales velocity is a good dashboard metric for summarizing a team’s effectiveness and efficiency. But its value is limited by the sheer amount of ingredients that go into its calculation.
“Classic” Sales Velocity
Sales velocity is a measure of the value of the pipeline that your sales team closes per unit of time. In other words,
Sales velocity = (opportunity count) * (pipeline conversion rate) * (avg deal size) / (average sales cycle)
Honestly, I don’t get a lot of questions on sales velocity. That might be because it’s a well-understood concept. Or, it might be because clients don’t see it as a critical metric. In a Gartner sales metrics survey, we saw that only 25% of respondents were using funnel velocity to measure their direct sellers. The top response was revenue, used by 89% of respondents.
Sales velocity is most useful when inspected as a trend over time, or when compared between segments of your business. It’s a convenient metric on a dashboard since it summarizes multiple effectiveness and efficiency metrics. If you’re already inspecting sales cycle time, average deal size, and pipeline conversion rate, then tracking velocity doesn’t add insight. And if you’re not tracking those underlying metrics, then you won’t be able to do a root cause analysis when your sales velocity fluctuates!
New: Verifier Velocity
However, there is a way to elevate the velocity concept to offer B2B suppliers more insight. Customer verifiers are specific customer actions that indicate progress within the buyer’s journey. If you define them and track them, and if you capture the total time spent on each verifier, then consider measuring “verifier velocity”:
Verifier velocity = (opportunity count) * (verifier success rate) * (avg deal size) / (average verifier cycle time)
This is a similar concept to sales velocity but calculated at a lower level. There’s more value here because verifier velocity offers more granular insight than the more general measures of sales cycle time, average deal size, and pipeline conversion rate. Sales leaders can use verifier velocity to compare the throughput of individual customer verifiers, across sellers, managers, segments or products. This insight will help show you where your buyers struggle and where sales managers can better enable their sellers.
Of course, you’ll still need to unpack verifier velocity to understand the causes of any changes. But as a stand-alone metric, it offers more detailed insight than sales velocity, and that leads to better actionability.
Gartner for Sales Leaders clients can explore the impacts of buyer enablement on pipeline analytics by reading Pipeline Management and Forecasting in a Nonlinear Buying Process.
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