Sales Velocity
What is sales velocity?
Sales velocity is the number of new clients acquired over a specific timeframe, such as monthly or annually.
The two problems
Problem 1: How do I increase sales velocity?
When you want to increase sales velocity, there are dozens of things you could do at the same time. Improve your website, hire more sales reps, improve your scripts, launch new ad campaigns, build partnerships, improve your offer… the list is endless.
Problem 2: Which improvement should I prioritize?
Even if you identified every possible improvement, how do you know which one to do first? Resources are limited—you can’t do everything at once.
The solution: Theory of constraints
Key Insight
I employ the theory of constraints: focus on the single highest-impact bottleneck rather than attempting simultaneous improvements across all areas.
This approach was used by Intel’s founder and endorsed by Charlie Munger, Warren Buffett, and Ray Dalio.
The methodology involves three steps:
- Gather numerical baseline data — get all your current KPIs
- Identify the weakest metric — find the number that, if improved, would produce the largest increase in new clients
- Adjust for implementation risk — if you can’t move the weakest number, move to the next weakest
Outbound Sales Teams (Cold Calling)
If you have a team that does outbound (cold calling), here are the 14 metrics I track:
- % A/B/C-Players — What percentage of your sales team are A-Players, B-Players, and C-Players? (I use Topgrading definitions)
- # of sales reps
- # of calls per rep per day
- % pick-up rate
- % conversion from pick-up to meeting booked
- % show-up rate for meetings
- % conversion from meeting to proposal
- % conversion from proposal to close
- Average deal value
- Sales cycle length (days from first contact to close)
- % of leads contacted within 5 minutes
- # of follow-ups per lead
- % retention rate (month over month)
- % referral rate (clients who send you new business)
Tip
The weakest metric in the list is almost always where your biggest opportunity lies. Fix that one metric and ignore everything else—until it’s no longer the weakest.
Inbound Sales Teams (Marketing-Generated Leads)
For teams that work inbound leads, the framework is similar but with key differences:
- # of monthly leads generated
- Lead quality score — what percentage of leads match your ideal customer profile?
- Lead response time — how fast do you respond?
- % conversion from lead to meeting
- % show-up rate
- % conversion from meeting to proposal
- % conversion from proposal to close
- Average deal value
- Sales cycle length
- % of leads contacted within 2 minutes
- # of follow-ups per lead
- % retention rate
- % referral rate
- Cost per lead by channel
Key Insight
Harvard Business Review research shows companies increased revenue 394% by responding to leads within two minutes. Lead response time is often the single biggest lever.
How to use this framework
- Measure everything: Get baseline numbers for every metric in the relevant framework
- Find the bottleneck: Identify the lowest-performing metric
- Focus relentlessly: Put all your energy into improving that one number
- Reassess: Once improved, re-measure and find the new bottleneck
- Repeat: This is an ongoing process, not a one-time fix
The beauty of this approach is its simplicity. Instead of trying to improve 14 things at once (and improving none of them meaningfully), you improve one thing dramatically.
Want help identifying your bottleneck?
Connect with me on LinkedIn or email andreas@andreaslar.com.