Understanding the speed at which revenue is generated in your agency is critical to achieving your financial targets, not simply in terms of hitting a revenue number but ensuring you hit the number promptly. One metric that stands out in this context is ‘sales velocity’.
DOWNLOAD NOW: Calculate Your Agency’s Sales Velocity with Our Free Tool!
But what exactly is sales velocity, how does it work, and why is it so vital for agencies?
Let’s dive in and find out more.
What Is ‘Sales Velocity’ And Why Does It Matter?
Sales velocity is a metric that measures how quickly your agency is generating revenue. It’s a powerful indicator of the health and efficiency of your sales process, showing how effectively your team is converting opportunities into actual revenue.
In simpler terms, sales velocity tells you how fast money flows through your sales pipeline. A higher sales velocity means your team is closing deals quickly, and cash is coming in faster.
How To Calculate Your Sales Velocity:
Sales velocity can be calculated using the following formula:
Let’s break this down:
- Number of opportunities – This is the number of potential deals or leads your agency is working on.
- Average deal size – Also known as ‘Average Order Value’ or AOV. This is the average amount of revenue generated from a single closed deal.
- Win rate: The percentage of deals won out of the total number of deals your agency pursued.
- Sales cycle length: This is the average time it takes for your team to close a deal, measured from the first contact with a lead to the final signature.
You can download our free tool to help you calculate your velocity but you will need to have a few figures to hand. Read on to work out what you’ll need to know first.
How to Calculate ‘Average Deal Size’
To calculate your agency’s Average Deal Size, you simply divide the total revenue generated by the number of deals closed over a given period.
Example: If your agency closed 20 deals in a month, generating a total of £100,000 in revenue, your Average Deal Size would be £5,000.
Understanding and Calculating Your ‘Close’ or ‘Win Rate’
Close rate, or win rate, is another critical component of sales velocity. It’s calculated by dividing the number of deals won by the number of deals pursued (including both won and lost deals) and then multiplying by 100 to get a percentage.
Example: If your agency pursued 50 deals in a quarter and won 20 of them, your close rate would be 40%.
Why is Sales Velocity So Important for Agencies?
Sales velocity is more than just a metric; when used properly it can be a tool that can provide deep insights into the efficiency and effectiveness of your sales process.
Understanding and leveraging sales velocity could be the key to unlocking faster growth and greater profitability for your agency.
Here are 3 key benefits of monitoring your sales velocity:
1. Revenue Forecasting: Sales velocity offers valuable insights into future revenue, helping you to predict cash flow and make informed financial decisions.
2. Sales Process Optimisation: By understanding each component of sales velocity, agencies can identify bottlenecks in their sales process and focus on areas that need improvement.
3. Competitive Advantage: A high sales velocity means your agency is probably closing deals faster than your competitors, allowing you to capture more market share and grow your business more rapidly.
How to Improve Your Sales Velocity
If you’ve done the sums and used the sales velocity calculator to see how you’re doing, and things aren’t too rosy, here are some ideas that might help you improve:
- Increase the Number of Opportunities: Focus on lead generation strategies such as content marketing, SEO, and paid advertising to bring more leads into your pipeline.
- Boost Average Deal Size: Upselling and cross-selling existing clients, offering premium packages, or targeting larger clients can increase your average deal size.
- Improve Win Rate: Enhancing your team’s sales skills through training, better qualification of leads, and improving your value proposition can lead to a higher close rate.
- Shorten the Sales Cycle: Streamline your sales process by automating follow-ups, reducing the number of touchpoints, and improving proposal delivery times.
If you missed it at the top, here’s a link to download our free sales velocity calculator:
DOWNLOAD NOW: Calculate Your Agency’s Sales Velocity with Our Free Tool!
