Every salesperson wants to sell more products and services faster.
Converting contacts and leads into customers is the top marketing priority for most companies.
Every salesperson knows that conversions take time. It takes, on average, 84 days to close a lead.
Sales velocity is a metric that salespeople use to measure how fast they are closing deals. Sales velocity is a measure of how fast your sales team is moving deals through the sales pipeline. It’s a good metric to focus on because it can help you identify places where deals are getting stuck and where your team is being most efficient. Organizations that need to predict their future revenue can benefit from using this method.
The point of this text is that increasing your sales speed will not only help you make sales more quickly, but you’ll also have time for more sales. Cha-ching.
Ever heard the phrase “volume is king”?
The theory can be applied to a lot of different contexts, not just fitness training or financial trading, but also to sales. The suggestion is that if you want to achieve your business goals, you should focus on selling more units. This article will explain what sales volume entails, discuss why it is important, and give advice on how to increase your sales volume.
What is Sales Velocity?
The sales velocity indicates how fast deals are completed in the sales pipeline to generate revenue.
The sales velocity equation draws on four metrics:
- Number of opportunities
- Average deal value
- Win rate or conversion rate
- Length of the sales cycle
Why is Sales Velocity So Important?
Regularly measuring sales velocity provides insight into the overall health of your business. The sales team’s effectiveness can also be measured.
If an organization is not making much money, the sales velocity equation can help figure out which parts of the sales process need to be improved.
If your number of opportunities, average deal value, and sales cycle length are all healthy, but your win rate is down, this could be an indication that there is a problem with your sales process. If you’re not providing your sales team with enough information about a lead before they start making calls, or if you’re not nurturing your leads with timely information and relevant content, you could be missing out on conversions If you’re not getting the results you want from your sales team, it may be time to take a closer look at the quality of your leads, and how your team is approaching them. Without enough information about a lead, or if you’re not providing timely and relevant information and content, you could be missing out on conversions. Even if you’re happy with your sales team’s win rate, it may be useful to break down the rate by sales team member. This could help you identify a weak link and take steps to improve their closing game.
But you can’t close deals If you have a high win rate and good opportunities, why can’t you close deals? The sales cycle is too long, and sales reps are taking too long to close. It is necessary to examine your sales cycle and determine which steps can be improved or removed for increased efficiency. It might be more beneficial to win a slightly lower percentage of deals, but to close them more quickly.
How to Calculate Your Sales Velocity
To calculate your organization’s sales velocity accurately, begin by separating the small, mid-market, and enterprise pipelines (or whichever of the three your company targets).
Your metrics are probably different in each market segment, especially the average deal value and how long the sales cycle takes. Customers who are ready to make large purchases will be more beneficial to the company, but because there are more people involved in the decision-making process, it will usually take a much longer time to finalize the deal. To get an accurate idea of your sales velocity, you need to look at the two factors separately.
You should calculate the sales velocity for each of your market segments.
Sales velocity is equal to the number of opportunities in a pipeline multiplied by the average deal value and win rate. The result must then be divided by the number of days in the typical sales cycle, as follows:
The sales velocity is the speed of the sales process. It’s calculated by multiplying the number of opportunities, the deal value and the win rate, and dividing it by the length of the sales cycle in days.
After completing the equation, you will have a number that is approximately the amount of revenue you are making each day. You can improve your sales by either increasing the value of each deal, or by decreasing the amount of time it takes to close each deal. Ideally, you should improve both.
Although a single calculation may not provide much insight into the productivity of a business or sales team, it is important to remember that this is not the only factor to consider.
To understand your performance, you need to see how these numbers compare to other relevant data. You should calculate sales velocity at regular intervals to see how your changes to the sales process have impacted it. This way, you can further adapt and improve.
What is Sales Volume?
Your sales volume is the total number of units sold within a given reporting period.
The word “unit” is most obviously applied to products, and can be reported at four different levels:
- Product line
- Customer subsidiary
- Sales region
However, service-based businesses can also use sales volume, with total units sold being equivalent to the number of hours billed (or similar).
Sales Volume vs. Revenue
Sales volume and revenue are both key metrics related to the sales a business generates, but they aren’t the same thing.
Sales volume is the number of units sold during a reporting period. It is not a measure of financial value. In contrast, sales revenue measures the value of all those sales, not the number of products or services sold.
For example, if a company sold 1,000 items of a given product with a $5 price tag, its sales volume and revenue would be as follows:
- Sales volume: 1,000 units
- Sales revenue: $5,000
Why is Sales Volume Important?
So why does volume even matter? Surely revenue (and profit) are far more important metrics?
That’s not true. Each metric provides valuable context about the performance of your sales function on its own, but when combined, they provide even more context.
You need to make a plan to increase sales and reach this target. If your company has a Q1 sales revenue target of $100,000, you will need to make a plan to increase sales in order to reach this target. You actually generate $105,000 in revenue during the quarter. So the business is in good health, right?
It is difficult to say if this is true or not without knowing how many units were sold. The revenue could have come from selling one very expensive product, or from selling a lot of cheap products.
It is difficult to determine the productivity and efficiency of your sales team or the effectiveness of your marketing activity without knowing the number of units sold.
What Is a Win Rate in Sales?
The sales win rate is the percentage of customers divided by the total number of deals in the pipeline.
How to Calculate Your Sales Win Rate
The sales win rate is the percentage of deals that are closed by a salesperson. We recommend using a Sales Win Rate Calculator to help you determine and track your win rate for accuracy and consistency. This will help you identify areas where you can improve your sales process and close more deals.
How to Define, Calculate, and Improve Sales Win Rate
If you want to improve your win rate, there are a few best practices to follow.
Be Consistent with Your Win/Loss Definitions
Some companies choose to include “No Decision” as part of their win-loss rate metric. This means that if a prospect has had a demo, seen a quote, but ultimately decides not to purchase from you or any of your competitors, that contact would be reflected in your win rate.
Some companies only consider a win to be when a prospect decides to go with them, and not when a prospect decides to stay with a competitor.
The two situations mentioned could be beneficial depending on the industry you are in and who your buyers are. The key point to take away is to be consistent in which accounts are and are not included in your win rate calculation.
Use a Sales Win Rate Calculator
To avoid miscalculations and set up a sales win rate tracking system, use a Sales Win Rate Calculator to track which percentages of your prospects closed into deals. This will help you avoid miscalculations and set up a sales win rate tracking system that accurately tracks which percentages of your prospects close into deals. This calculator can be used to see which areas of your product or sales process have the most impact on your profits.
Determine Time Frames
To ensure that everyone in your sales department understands win rate, be clear about when the calculation applies. It is acceptable to calculate and share a company’s perpetual win rate, but it is advisable to be more specific than that. It is beneficial to calculate your win rate by month, quarter, or year so your company can track your progress.
Choose Win/Loss Criteria
There are many reasons your prospects could choose to become customers or not, but most can be grouped into a few main categories. Here are a few of the most commonly utilized:
- Features: The features of your product or service did not meet the requirements of the prospect.
- Price: Your final asking price exceeded what the prospect was willing to pay.
- Competition: The prospect decided to either go with – or stay with – a direct competitor.
- Need: The perceived value of your product was not apparent to your prospect, and thus they felt no need to close.
- Timing: Your prospect is interested, but was either unable or unwilling to close at this time.
Sometimes a buying decision is not made because of a need or timing, but because no decision was made about you or a competitor. It is possible that after a year, the person you spoke to will either need your product or will be in a better position to make a decision about your offer.
It is important that your reasons for losing a sale are clearly defined so that the Sales Operations team understands why they are getting a “Closed-Lost” notification in the CRM.
Categorize Deal Stages
Once a contact is classified as an SQL, make sure to have some sales-focused discussions that reflect the buyer’s journey during these stages. While these stages will vary in each business, some of the most frequently utilized could include:
- Demo or Quote Requested
- Demo Held
- Quote Sent
- Revised Quote Sent
- Stakeholder Bought In
- Contract Sent
When you break down your sales stages and properly mark accounts in your CRM, your team will be able to get more detailed insights into win rate by criteria.
How to Improve Sales Win Rate
Looking to improve your sales win rate? The following are tips from some of HubSpot’s top salespeople.
Analyze win-loss rates by important criteria.
It is essential to have clearly defined loss reasons, deal stages, and classification of reps so that you can factor them into your win-loss rate analysis.
For example, if you analyze your win rate by rep, you can identify which reps need further sales training or should be placed on a performance improvement plan. Also, if you analyze your loss rate by reason, your sales enablement team can better prepare reps to speak on specific competitors or feature-specific questions.
Download HubSpot’s Sales Metrics Calculator to help you determine specific win and loss rates by criteria. The calculator provides helpful insights.
Define clear next steps.
Sarina Kowaguchi, an account executive at HubSpot, found that setting and clarifying the next steps in the sales process increases the likelihood of closing the sale.
“We were asked to examine all of the deals we lost in the previous month and figure out why we didn’t win them,” Sarina said. “We were also supposed to identify what we could learn from the experience.”
“A common theme across the team was the lack of concrete next steps, resulting in a deal to fizzle out or go ‘dark.'”
Sarina’s team set up a strategy where they would have a 15-minute call with the client in between steps of the process, even when the only thing left was signing the quote link. She says that if the quote is signed before the meeting time, the call will be canceled, but if not, they will meet and use the time to answer any questions.
According to Sarina, her team’s improved performance is due to their ability to _______. According to Sarina, her team’s improved performance is due to their ability to more accurately predict when a quote will be finalized, shorten the sales timeline, and streamline communication with customers.
THE PROBLEM: YOUR BUSINESS ISN’T GROWING AS FAST AS IT SHOULD!
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