How To Calculate Pipeline Velocity

 
Team ThunderAct

In sales, tracking key metrics is a must. It helps determine the success of a strategy. At the same time, it provides companies insight on what decision is best for the future.

 

Perhaps one of the most important sales metrics companies should track and optimize is pipeline velocity. However, many sales teams often forget about it. 

 

What It Is


Generally, pipeline velocity helps sales teams understand the overall health of their sales funnel. But it does not only help in tracking how well the team is doing in terms of its sales strategies. With proper optimization, the pipeline velocity rate will help you make proper changes to the sales process to create a more efficient team.

 

As the name suggests, sales pipeline velocity refers to the speed at which qualified opportunities, leads, or prospects move from one end of the sales funnel to the adder. For B2B marketers, it is one of the best ways to determine the health of revenue. It will also be helpful in sales forecasting.

 

Calculating Pipeline Velocity


Having customer data is necessary for sales teams. However, how you use the data will determine success or failure. 

 

To better understand pipeline velocity, you have to be familiar with the four factors that are significant in the formula. These include the following:

 

  • Number of Sales Qualified Leads – These refer to the number of leads the sales team can work through during a certain period. 

 

  • Average Closed Deal Size – It may refer to the dollar value of the average sale or average customer lifetime value.

 

  • Conversion Rate – Also known as win rate, conversion rate refers to the number of leads who turn into paying clients during a given period. For instance, if you have 200 leads and 80 turned into paying customers, the rate will be 40%. 

 

  • Average Sales Cycle – How long do your prospective clients take to move through the sales pipeline? The answer may vary depending on the number of steps involved in your sales cycle, the complexity of the product, and the price.

 

You will be using the same formula to calculate velocity in Physics. However, your data will be based on the abovementioned factors.

 

Calculate using the following formula:

 

Pipeline Velocity = SQLs X Average Closed Deal Size X Overall Conversion Rate

 

Divide the answer by the average sales cycle in days.

 

Here is an example to help you better understand the formula:

 

One member of your sales team has 20 SQLs. Their win or conversion rate is 20%. The average deal size is $2,000. Currently, the average sales cycle is 45 days.

 

Using the formula, you will have to multiply 20, $1,500, and 10%. Divide the answer by 45. That means the pipeline velocity of that team member is around $67 per day or approximately $2,010 per month.

 

Remember that having data will be helpful, but your team will have to utilize it properly to ensure success. The pipeline velocity rate of your sales team can help determine the cause and effect of certain information directly affecting the company’s revenue.

 

Your company’s numbers may change. Any improvement to these areas may increase the overall pipeline velocity of your sales team.

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