Breaking Down Sales Velocity

Sales velocity formula

Sales Velocity is a powerful diagnostic tool for sales leaders because it captures the three metrics managers value most when evaluating reps on bottom-of-the-funnel KPIs:

  • What percentage of deals is a rep winning?

  • What’s the average size of those won deals?

  • How long does it take to win a deal?

With insight into those three questions, managers can readily identify coaching opportunities for their reps. It’s important to understand that while reps may have identical, or similar, sales velocities, the coaching approach for each can vary. We’ll examine that in more detail below.

First, let’s review the basics.

What Is A Rep’s Sales Velocity?

Sales Velocity measures the expected value of an opportunity created by a rep within a given time. Sales Velocity is expressed in dollars. Sales Velocity is specific to the examined time period and will change over time.

How Is Sales Velocity Calculated?

As described above, Sales Velocity has three components:

  • Average Deal Size

  • Close Rate

  • Sales Cycle

To calculate Sales Velocity, multiply a rep’s average deal size by their close rate, then divide that number by their sales cycle.  Check out our metrics glossary to learn more about how to calculate sales velocity.

(Average Deal Size x Close Rate) / Sales Cycle = Sales Velocity

Identical Sales Velocities Don’t Mean Identical Coaching Messages

We previously mentioned how reps with similar Sales Velocity numbers can often require different coaching strategies. Below is a team of four reps. Their sales velocity figures are similar, but a manager’s coaching focus should be different for each, based on the individual KPIs comprising their Sales Velocity number.

Sales velocity breakdown by rep, showing average deal size, close rate and sales cycle

Drilling into each rep’s Sales Velocity, here’s how a manager might tailor their respective 1:1 discussions:

  • Sarah excels at closing deals quickly, which helps her achieve the highest Sales Velocity, but her deals are small and she’s not winning a majority of them.

    • Manager Coaching: Winning larger deals would be ideal, but winning more deals, regardless of size, is a strong first step.

 

  • Michael is doing well, comparatively, for average deal size, but his close rate and sales cycle could be better. If those numbers don’t improve and his average deal size decreases, his Sales Velocity will suffer.

    • Manager Coaching: Focus on improving close rate first, while maintaining the average deal size. A shorter sales cycle would help, but it’s not dragging down performance too much.

 

  • Jack has an awesome close rate, but his average deal size skews smaller and his sales cycle isn’t great.

    • Manager’s Coaching: Trimming sales cycle, even a little bit, will improve sales velocity and provide more time to find larger deals.

 

  • Jessica is landing big-ticket deals, but her sales cycle is more than 3x that of Sarah and 50+% longer than Michael’s.

    • Manager’s Coaching: Closing deals more quickly will free up time to find more large deals, where Jessica is proficient.

 

“Unpacking” a rep’s Sales Velocity number to learn what the drivers are is the optimal way to use it as a coaching tool. Each component is a lever that impacts performance.  Tracking those components over time to understand how fluctuations affect individual Sales Velocity figures gives managers the framework for targeted, data-driven conversations with each rep.

Sales Rep Scorecards Can Help

Sales Rep Scorecards automatically calculate super-metrics like Sales Velocity. Sales managers use Sales Rep Scorecards to improve sales performance using data.  

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John Byrne

John is a Senior BizOps Strategist at Rekener. Each day, John collaborates with Rekener customers to leverage the Rekener platform and drive deep business insights. A veteran of the technology startup space, John’s love for data storytelling helps sales, marketing, and ops teams see the big picture in a way that’s easily understood and actionable.

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