Description
Sales velocity measures how quickly a company's customers move through the sales pipeline and fetch revenue. This metric uses four factors (opportunities, average deal size, win rate, and sales cycle length) to know how much revenue can be expected over a given period.
Example
Sales Velocity = (Opportunities x Deal size x Win Rate) / Length of Sales Cycle. Suppose a business has 50 opportunities, an average deal size of $25,000, an average win rate of 10%, and a sales cycle of 50 days. Thus,Sales velocity = (50 * .10 %* $25,000) / 50 = $2,500. This is the rough estimate of revenue that the company is able to bring in every day.
Why it matters
Sales velocity is an indicator of the company's health and its ability to grow. Businesses can use this metric to optimize their processes and succeed at sales.