Sales Velocity measures sales expected over a period, usually the next day or month, in dollar terms. It gauges how quickly you make money from your sales efforts and is based on Pipeline, Win Rate, and Average Sales Cycle.
This is the best sales metric for forecasting sales team performance. It not only estimates how much pipeline will convert, but how quickly it will do so. The main use cases are financial forecasting but also to diagnose sales person performance. If someone is underperforming, Sales Velocity makes it easy to diagnose if it's because of speed, win-rate or size of pipeline.
Total Value of Pipeline Deals x Win Rate / Average Sales Cycle
To calculate Sales Velocity, multiply the Total Value of Pipeline Deals by your Win Rate, then divide by the Average Sales Cycle.
To increase your Sales Velocity, focus on increasing the number of opportunities in your Pipeline, increasing your Average Deal Size, improving your Win Rate, and shortening your Average Sales Cycle. Also, consider lengthening the period over which you measure Sales Velocity to account for seasonality or unusual deal lengths.
It's not only about speed. While the term 'velocity' suggests speed, sales velocity is not just about closing deals faster. It's about the efficiency and effectiveness of the entire sales process, encompassing factors like Average Deal Size, Win Rate, and the number of opportunities, not just the length of the Average Sales Cycle.