What is Sales Velocity?

Definition

Sales velocity is a measurement of how quickly your company is making money. It calculates the speed at which deals are moving through your sales pipeline and generating revenue over a specific period. A higher sales velocity means you are making money faster. It is considered a critical health metric for a sales organization because it incorporates multiple key factors into a single formula:

Sales Velocity=Length of Sales Cycle(Number of Opportunities×Average Deal Value×Win Rate)​

Examples

Let’s calculate the sales velocity for a company over the last quarter (90 days):

• Number of Opportunities: They had 200 opportunities in their pipeline.
• Average Deal Value: The average deal was worth $10,000.
• Win Rate / Closing Rate: Their win rate was 25% (0.25).
• Length of Sales Cycle: It took an average of 60 days to close a deal.

Calculation:

Sales Velocity=60 days(200×$10,000×0.25)​=60$500,000​≈$8,333 per day

This means the company generates approximately $8,333 in revenue every day.

Advantages/Benefits

• Holistic Health Metric: It provides a comprehensive view of sales performance by combining the most important metrics (volume, value, conversion, and speed) into one number.
• Diagnostic Tool: By analyzing the four components of the formula, sales leaders can pinpoint exactly where to focus their efforts. (e.g., « Our velocity is low because our sales cycle is too long. »).
• Improved Forecasting: Understanding sales velocity allows for more dynamic and accurate revenue forecasting.
• Drives Strategic Decisions: Helps managers decide whether to focus on getting more leads, increasing the deal size, improving the closing rate, or shortening the sales cycle.

Related terms

• Sales Cycle
• Sales Pipeline
• Closing Rate
• Average Deal Value
• Revenue Forecasting
• Sales Performance