Sales Velocity: Formula and What the Daily Value Means
Online version: https://funneleconomics.ai/resources/glossary/sales-velocity
Sales Velocity is a look back: the value that moved through the pipeline in a completed period, per day of an average full sales cycle. The calculation is the number of worked deals times average deal size times the qualified win rate, divided by the average sales cycle. The daily value is calculated, not a payment received per day.
How is Sales Velocity calculated?
Sales Velocity = number of worked deals × average deal size × qualified win rate ÷ average sales cycle
- Number of worked deals – the qualified opportunities the team worked on during the period; a count, not an amount
- Average deal size – the amount won, divided by the number of deals won
- Qualified win rate – opportunities won, divided by won plus lost, counted by number
- Average sales cycle – the days from creation to win, averaged over the deals won
All four inputs come from the completed period, but not from the same set of deals. A worked deal is a qualified deal that was present at the start of the period, was created in it or was moved into it. That includes deals decided in it. The number refers to the period, not to the stock at the end of the period. Deal size and sales cycle use deals won only.
Sales Velocity uses the qualified win rate. A qualified deal has passed the lead stages and stands in a stage your company classifies as an opportunity stage. The qualified win rate stands on a different set of deals than the number of worked deals; Sales Velocity carries this mixture.
What is Sales Velocity for, and what is it not for?
Sales Velocity serves to compare completed periods. When Sales Velocity changes, at least one of the four inputs has changed: the worked deal count, the deal size, the qualified win rate or the sales cycle.
Sales Velocity is not a forecast. An extrapolated Sales Velocity assumes that deal size and qualified win rate stay the same. It also uses a deal count that does not yet exist.
For the question of what will close in future, bEFV, rEFV and cEFV apply. bEFV and rEFV value the actual stock deal by deal. cEFV goes beyond that and also takes in deals that only arise during the period.
What does the daily value mean, and what does it not mean?
The daily value is a normalisation, not a payment stream. The daily value spreads the value formed from the worked deal count, deal size and qualified win rate over the days of an average full sales cycle.
The check: Sales Velocity times the average sales cycle gives back the value it was calculated from.
How Sales Velocity differs from sales cycle and BPV
The sales cycle is a duration. BPV measures, per stage, by what percentage the time spent in the stage deviates from the SLA, the duration set for that stage.
| Sales Velocity | Sales cycle | BPV | |
|---|---|---|---|
| Measures | the value that moved through the pipeline in a completed period, per day of an average full sales cycle | average duration from creation to win | deviation of the time in a stage from the SLA |
| Unit | money per day | days | percent |
| Scope | completed period | deals won | single stage |
Related terms
FAQ
How do you calculate Sales Velocity?
Sales Velocity is the number of worked deals times average deal size times the qualified win rate, divided by the average sales cycle in days. A worked deal is any qualified opportunity the team worked on during the completed period. Average deal size is the amount won per deal won. The result is an amount of money per day.
Is Sales Velocity the revenue that comes in per day?
No. Sales Velocity is a normalisation, not a payment stream. Sales Velocity spreads the value formed from the worked deal count, deal size and qualified win rate over the days of an average full sales cycle. Sales Velocity times the average sales cycle gives back the value it was calculated from. The daily value does not say that this amount arrives every day.
Can Sales Velocity forecast future revenue?
No. Sales Velocity is a look back at a completed period. An extrapolated Sales Velocity assumes that deal size, qualified win rate and deal count stay the same. For the question of what will close in future, bEFV, rEFV and cEFV apply. bEFV and rEFV value the actual stock deal by deal. cEFV goes beyond that and also takes in deals that only arise during the period.
What is the difference between Sales Velocity and sales cycle?
The sales cycle is a duration: the average number of days from the creation of a deal to the win. Sales Velocity is an amount of money per day. The sales cycle is the denominator of the Sales Velocity formula. A shorter sales cycle therefore raises Sales Velocity arithmetically if the three other inputs stay the same. The value Sales Velocity is calculated from does not change as a result.
What is pipeline velocity?
Pipeline velocity is another name for Sales Velocity. Both names mean the same measure: the number of worked deals times average deal size times the qualified win rate, divided by the average sales cycle. Pipeline velocity, too, is a look back at a completed period and not a payment received per day.