Sales Pipeline Velocity: The Key to Revenue GrowthThere’s no arguing that data-driven sales strategies have become a tried-and-true staple in the world of B2B sales. But, as technology continues to advance and sales leaders have access to more data than ever before, it’s become increasingly difficult to understand which metrics matter and which metrics don’t.
Today, we introduce — or perhaps reintroduce — you to the king of all sales metrics: pipeline velocity. Keep reading as we explain what pipeline velocity measures, why it’s important, and the different tactics you can implement to improve it.
Let’s get into it!
What is pipeline velocity and what does it measure?
Velocity, in the physics world, measures the rate of change over time. Similarly, in the sales world, pipeline velocity measures the rate at which a prospect moves through your sales pipeline towards the end of the sales funnel — where deals are either won or lost. The equation to measure pipeline velocity looks like this:
Pipeline velocity = (qualified opportunities x win rate x deal size) / (length of sales cycle in days)
The final result of this equation represents the average amount of money a sales team brings in each day. Because pipeline velocity incorporates four critical sales metrics, teams who use this equation to measure success see two key benefits: The ability to closely monitor progress over time, and the ability to pinpoint exactly which part of the equation is slowing their team down.
How to Improve Pipeline Velocity
The ultimate goal of any sales team is to generate revenue for their company. Therefore, the goal of organizations that measure success with pipeline velocity is to increase that number.
The beauty of pipeline velocity is that there’s no one right or wrong way to improve it. But, considering the metrics included in the equation above, pipeline velocity increases as a result of one (or all) of the following:
- An increase in created opportunities: The simplest way to boost pipeline velocity is to create more opportunities — in other words, generate a larger amount of sales-qualified leads. “Qualified” is the key distinction here: if your marketing department is generating more leads, but your pipeline velocity isn’t improving, poor lead quality is the most likely cause of the problem.
- An increase in win rate: The next variable in the equation, win rate refers to the percentage of sales opportunities that turned into successful deals. A low win rate means you’re only converting a small percentage of your opportunities into customers. There are many potential causes for a low win rate — including poor lead qualification, insufficient lead nurturing, poor communication, and more.
- An increase in average order size: Increasing your average order size will also boost pipeline velocity — as larger deals means more revenue. That’s why closing more deals isn’t always the key to increased velocity; if you close more deals but they’re all extremely low-value deals, your average deal size will decrease. Meaning, you’re making less money per deal and therefore failing to boost pipeline velocity.
- A shorter sales cycle: Sales cycle exists on the other side of the equation — meaning you want to decrease your sales cycle to boost pipeline velocity. It’s all about striking the right balance: you might increase your average order size, win rates, and number of opportunities — but if in doing so you’ve dramatically slowed your sales cycle, you’ll fail to generate more revenue.
Now that we’ve taken a closer look at the pipeline velocity equation, let’s get more specific. Keep reading for some tips to boost your pipeline velocity today!
1. Optimize and integrate your sales and marketing tech stack
Sales and marketing departments rely on specific tools and technologies to streamline the entire sales process, all the way from generating leads to sending contracts when a deal’s ready to be finalized. Both departments play an equally important role in boosting pipeline velocity — marketing needs to generate and nurture high-quality leads, sales needs to capitalize on those opportunities.
As a result, sales and marketing alignment is a foundational element of pipeline velocity. If these departments aren’t aligned, your entire sales pipeline suffers: marketing passes on bad leads, qualified leads are routed to the wrong reps, sales lacks necessary information to have informed conversations with buyers, and so on. To avoid these pitfalls, it’s imperative that your sales and marketing departments are using the right technologies — more specifically, technologies that integrate with one another.
With a fully integrative tech stack, your CRM, marketing automation platform, content syndication tools, and any other platforms that store prospect and customer data will be able to share that data quickly and efficiently across teams. Otherwise, this data resides in separate silos, which reduces visibility for both departments and will precipitate a number of errors, miscommunications, and communication breakdowns — all of which will jam up your sales pipeline and put a dent in your potential revenue.
2. Conduct a win/loss analysis.
Win rate is a valuable metric to solve the pipeline velocity puzzle, but it’s only actionable if you know why you won the deals you won and lost the ones you lost. In order to truly understand the effectiveness of your sales strategy, we recommend that you conduct a comprehensive win/loss analysis.
A win/loss analysis refers to the process of analyzing past deals for the purpose of uncovering insights about your strategy — insights you then leverage to win more of your opportunities in the future. This process is critical to boosting pipeline velocity and generating more revenue; it’s been proven that companies who conduct win/loss analyses outperform their competitors in terms of reps attaining quota, customer retention rate, lead conversion rate, and more key performance indicators (source).
If you’re conducting a win/loss analysis for the first time, here are some steps to consider:
Partner with a third-party analyst: The key insights of a win/loss analysis will come from interviews with past customers and prospects. If your budget and resources will allow for it, it’s best to hire a third-party company to conduct these interviews. An well-trained outside vendor will approach these interviews without any emotional or professional investment in the results, and prospects and customers will feel more comfortable sharing honest feedback about their experience.
Interview customers as well as lost prospects: As you conduct a win/loss analysis, you’ll want to interview as many subjects as your time and resources will allow. But, make sure you maintain a balance between won and lost deals when you choose which customers and prospects to interview. If you only examine lost deals, you might fail to gain insights into what elements of your sales strategy are working perfectly. But if your analysis is skewed towards happy customers, you’ll fail to generate honest feedback about your flaws and areas of improvement.
Prepare strategic questions: The goal of a win/loss analysis is to get a full scope of the customer or prospect experience, from the moment they initiated contact with your company to the moment they decided to buy — or not buy — your products. Prepare questions regarding their initial interests in your company, their pain points, their experience speaking with your sales team, and most importantly, why they ultimately decided to sign a deal or walk away.
3. Try a multi-threaded selling approach.
Multi-threading refers to the process of involving multiple decision-makers in a deal. There are many significant benefits of multi-threaded sales relationships: most importantly, you reduce the risk of a deal falling through because of turnover or other unforeseen changes. Think of it this way: the more connections (“threads”) you make at a target company, the less you’ll risk a deal falling through.
Multi-threaded relationships also contribute to faster sales cycles, as communicating with several decision-makers will reduce downtime and allow you to address a variety of concerns, opinions, and objections upfront rather than wait for the decision-makers to discuss them behind closed doors.
Despite these benefits, studies suggest that only around 9% of sales deals are multi-threaded (source).
To build multi-threaded relationships, your prospecting strategy should prioritize not only reaching decision-makers, but reaching multiple decision-makers at each target company. Consider investing in company hierarchy data to develop insights into a prospective buyer’s key stakeholders. Leverage personal networks to identify additional connections at your target companies.
Engaging multiple decision-makers is less difficult than it may seem — so don’t get complacent and think the single stakeholder you’ve found is enough to get a deal done. The extra work will be worth it: the mitigated risk of multi-threaded relationships will result in more won opportunities, and often a faster sales cycle — two of the key elements of accelerated pipeline velocity.
Final Thoughts on Pipeline Velocity
There’s no such thing as a fully-optimized sales pipeline — every sales strategy has its own faults and inefficiencies, some more major than others, which impact the quality and effectiveness of the pipeline. The most successful sales organizations are the ones who rigorously track, analyze, and improve their strategy based on the data-driven insights they’ve collected. There are hundreds of metrics you can track to improve your own strategy, but none are more all-encompassing and impactful than pipeline velocity.
We hope today’s blog post inspired you to consider new ways to increase the velocity of your sales pipeline! Whether you implement a major strategic shift or remedy a few minor inefficiencies, these data-driven decisions will make an immediate impact on your sales pipeline and, most importantly, the revenue you bring in for your business.
Author Bio: Sam Holzman is the Content Marketing Manager for ZoomInfo. Follow him on LinkedIn and Twitter. ZoomInfo is the leading business contact database with best-in-class technology to pinpoint, process, and deliver the marketing and sales intelligence you need— exactly when and how you need it, to always hit your number.