Sales Velocity

What is "sales velocity"?

Sales velocity: "The number of new clients you get over a time period. For example # of new clients per month, or # of new clients per year."

Problem 1: How to increase sales velocity?

There are lots of ways to increase # of new clients. It's useful to picture every opportunity as a pile of cash that's burning—that you can save by fixing that bottleneck/implementing that solution.

But you have lots of these "fires" burning. At least 50-100 big ways to increase # of new clients. Yet if you try to put all of these 50-100 fires out at once, you'll get burned out yourself, and you'll not reach your goals—again.

Problem 2: How to prioritize all the ways you can increase sales velocity?

Here's the high-level overview of how I do it:

I focus on putting out just 1 fire—the biggest one—and I ignore the 99 other "lost" opportunities and happily watch those fires burn.

Then, when I am absolutely sure I've saved the biggest pile—and only then—do I start saving the 2nd biggest pile of cash. And I ignore the 98 other piles—happily.

This is the theory of constraints, which the founder of Intel was known for. Charlie Munger and Warren Buffet also used similar thinking. Ray Dalio recommends similar thinking as well. I've found it very useful to follow their footsteps and do the same.

Here's step-by-step how I do it:

I look at it like a math & probability problem, which it is. And I simply do the thing with the highest risk-adjusted increase in throughput (# of new clients)—given my available resources.

Step 1: First I input all the numbers below.
Step 2: Then I find the weakest link—the number that if increased, would produce the highest increase in # of new clients. Most often it's the lowest number.
Step 3: Finally I adjust for risk. For example, if I don't see any way that I can move the smallest number, then I go on to the next smallest number, and so on.

Here are the KPIs I look at to decide — for a company with an outbound sales team

This is when you cold call potential clients. Your biggest opportunity to increase sales velocity is increasing the #1 weakest KPI below, and ignoring all the other KPIs—but do consider risky interaction effects.

• (%) Percentage of A-Players, B-Players, and C-Players on the sales team. (I use Topgrading for definitions).
• (#) Number of leads to call.
• (time) Time spent finding the right contact information/dialing wrong numbers.
• (%) Percentage who pick up the phone.
  • If low: The phone numbers you're calling from can be flagged as spam.
• (%) Percentage who books an appointment.
• (%) Percentage who show for their appointment.
• (%) Percentage who are qualified for the offer (SQLs).
• (%) Percentage who close (make their first purchase with you).
• ($) Average order/contract value.
• ($) Cash collected upfront (how much of the contract value is collected upon the initial payment).
• (#) Number of new clients in the past 12 months, per month.
• (#) Number of already existing clients lost in the past 12 months, per month.
  • This, along with sales velocity above, is necessary to know in order to set an intelligent sales goal.
• (#) Number of sales reps who have quit/been fired in the last 12 months.
• (#) Number of new sales reps hired in the last 12 months.
  
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Here are the KPIs I look at to decide — for a company with an inbound sales team

This is when your marketing generates leads that you then call. Your biggest opportunity to increase sales velocity is increasing the #1 weakest KPI below, and ignoring all the other KPIs—but do consider risky interaction effects.

• (%) Percentage of A-Players, B-Players, and C-Players on the marketing and sales team. (I use Topgrading for definitions).
• (#) Number of inbound leads.
  • If lowest KPI: You have a marketing problem, not a sales problem. I'll cover that in a later post.
• (time) Time delay before reaching out to inbound leads.
  • P.S. Read this HBR study to see how much more revenue companies made by simply being quicker to call inbound leads. Hint: The average company increased revenue 394% when waiting less than two minutes. The average.
• (%) Percentage of inbound leads you called, at all, over the last 12 months.
• (%) Percentage who pick up the phone.
• (%) Percentage who books an appointment.
• (%) Percentage who show for their appointment.
• (%) Percentage who are qualified for the offer (SQLs).
• (%) Percentage who close (make their first purchase with you).
• ($) Average order/contract value.
• ($) Cash collected upfront (how much of the contract value is collected upon the initial payment).
• (#) Number of new clients in the past 12 months, per month.
• (#) Number of already existing clients lost in the past 12 months, per month.
  • This, along with sales velocity above, is necessary to know in order to set an intelligent sales goal.
• (#) Number of sales reps who have quit/been fired in the last 12 months.
• (#) Number of new sales reps hired in the last 12 months.

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