What is sales velocity?
Sales Velocity is a key business metric that provides insight into how quickly your company is generating revenue on a daily basis. It quantifies the speed at which deals are closing and revenue is being realized, offering a snapshot of your company's sales performance.
Why is Sales Velocity important to measure?
Sales Velocity is a versatile metric with multiple benefits. It not only reflects sales team health and productivity, but it also highlights areas for process improvement. Moreover, Sales Velocity plays a vital role in accurate sales forecasting, offering valuable insights for strategic planning.
How is Sales Velocity calculated?
Sales Velocity is calculated by dividing the total value of bookings by the average deal length. The average deal length is the average number of days it takes for a deal to close. The total value of bookings is the sum of all the deals that were closed during the period. Sales Velocity is calculated by dividing the total bookings (the revenue generated from closed deals) by the average deal length.
For instance, if your company has $200,000 in total bookings over a month and the average deal length is 30 days, the Sales Velocity would be:
Sales Velocity = $200,000/30 = $6,666.67 per day
This means that, on average, your company is generating approximately $6,666.67 in revenue each day. Monitoring this metric over time helps in assessing the effectiveness of sales strategies, identifying trends, and making data-driven decisions to enhance revenue growth.
In summary, Sales Velocity provides a clear and actionable metric to gauge how efficiently your company is converting deals into revenue on a daily basis. By calculating and analyzing this metric, businesses can optimize their sales processes, improve revenue generation, and drive overall growth.