Deal Velocity Ratio

What is Deal Velocity Ratio?

The Deal Velocity Ratio assesses the efficiency of generating daily revenue per deal, factoring in the average sales price and deal length. It serves as a compass guiding businesses toward revenue optimization.

Why is Deal Velocity Ratio important to measure?

The Deal Velocity Ratio is a strategic instrument that carries substantial implications for revenue optimization. When sales representatives demonstrate consistent closure of a $50K deal in 50 days and a $100K deal in 100 days, it signifies a critical milestone—an indicator of a repeatable sales motion and a well-aligned product-market-sales fit. This metric empowers businesses by providing a focused lens to identify deals generating revenue efficiently, driving resource allocation, refining sales strategies, and ultimately elevating overall revenue performance.

How is the Deal Velocity Ratio calculated?

The Deal Velocity Ratio is calculated by dividing the Average Sales Price by the product of Average Sales Cycle Length and 1000.

Formula

Deal Velocity Ratio =Average Sales PriceAverage Sales Cycle Length X 1000

Example

For instance, if the average sales price is $10,000 and the average deal length is 15 days, the Deal Velocity Ratio would be 0.67.

An exceptional ratio is above 1, indicating a deal generates revenue swiftly. A good ratio surpasses 0.8, highlighting efficient revenue generation. A ratio exceeding 1.15 could signal the need to bolster the sales team to manage increased deal volume effectively.

In summary, the Deal Velocity Ratio offers a practical and standardized measure for evaluating daily revenue efficiency per deal. By analyzing this metric, businesses can refine sales tactics, prioritize deals strategically, and make informed decisions for heightened revenue growth and sales team efficacy. Just as effective navigation requires a compass, the Deal Velocity metric provides businesses with a compass to steer their revenue strategy.