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Striving for faster and more efficient sales is a basic desire of many entrepreneurs. This is where the concept of sales velocity comes into play, which is a key indicator of success for numerous companies. But what does the term really mean and how can it be used to benefit an organization?
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Sales velocity is a concept used to analyze how individual factors contribute to the transformation of leads into successful sales. It can simply be defined as the rate of revenue generation - instead of the standard unit of “kilometers per hour,” we use “money per month” here. This is a metric that is increasingly being used to accelerate the sales process. As Gregory Blazevich aptly pointed out, sales is ultimately a matter of simple math. That's why we start with a basic formula:
Sales velocity (SV) is a term used to describe the rate at which a company converts potential customers into actual buyers. It consists of four key factors:
#leads : Represents the number of people showing interest in purchasing a product or service. These could be people contacted by B2B vendors, users using trial versions of SaaS applications, or unique visitors to online stores.
ATV : stands for the typical value of a single transaction made by a customer. For example, it is the purchase amount for online stores or the subscription value for SaaS applications.
% conv : is the percentage of potential customers who ultimately decide to purchase a product or service.
T : Represents the time that elapses from the moment a potential customer arrives until he or she makes an actual purchase.
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Sales velocity is a key indicator that not only tells you the amount of sales achieved in a given period, but also allows you to understand what contributed to this result. It depends on various factors, such as the number of customers, the conversion rate, the time it takes to make a purchase and the value of a single transaction. There are several ways to achieve a close approximation of sales velocity by manipulating these variables. The following are examples:
Example:
Number of leads – 50
ATV – 25 000 zł
% conversion– 0,04
Time – 28 days
SV = 1785,7 zł/28 days
Sales velocity is a tool that not only shows you exactly how many sales you've made over a certain period of time, but also helps you understand what was a key contributor to that success. Was it a higher number of leads in the funnel, or a significant increase in the conversion rate? Perhaps you reduced the time it took for customers to make a decision or increased the value of the transaction by up-selling additional products? Sales velocity analysis allows you to identify key success factors and adjust your sales strategy.
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To get more leads, it is important to reach more potential customers or explore new segments and geographic markets. You can achieve this through various strategies, such as effective use of cold mailing or developing a direct sales force. It is also crucial to skillfully qualify leads and identify potential sales opportunities. It is no less important to quickly reject opportunities that have little chance of closing. This leaves the sales team more time to focus on customers who are actually interested in making a purchase.
In order to convince the customer to buy more or more expensive products, you can consider changing the price list, promoting complementary products or encouraging a move to a higher subscription plan for a SaaS service. These actions should always be based on an analysis of the customer's needs, their goals and the obstacles they face in achieving business success. Showing the customer that you understand their problems and can offer effective solutions can lead to sales based on value, not just price. It's sometimes worth focusing more on meeting the customer's needs and other possible solutions you can offer. Investing time in comprehensively understanding the customer can help increase the value of their purchases.
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In order to more effectively encourage customers to make purchasing decisions, you need to use a variety of strategies. If you're using online sales, A/B testing, creating dedicated landing pages for different groups of customers and eliminating errors that can lower conversions are essential. It's also important to provide relevant content on your website and in any marketing materials that reach potential customers. In the case of direct communication, it is worth personalizing offers, including examples, testimonials, case studies and names of satisfied customers. Arguments should be based on benefits that will convince a potential customer to buy. Do not forget to use the data collected in the CRM system and focus on each stage of the sales process to increase the effectiveness of finalizing the transaction.
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The time it takes from the moment of interest in a service or product to the completion of a transaction, the sales cycle, is a key element in sales velocity analysis. It is worth examining how long this process takes in your company and what influences it. As a rule, it takes more time to sell higher-value products or services, while smaller transactions are often completed faster. If you want to reduce the decision time of a customer interested in more costly offers, it's worth considering different strategies, such as offering trial versions or using content marketing activities that provide customers with the necessary information to make a purchase decision faster.
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