Tips, Tricks & Best Practices

JonathanV
Participant

Sales Velocity per Sales Rep

SOLVE

Hi community members,

I am trying to come up with actionable reports for our SaaS sales team. One metric I came across a few times (also in this Hubspot blog article) is sales velocity. It is usually calculated based on the number of opportunities, the win rate, the average deal size, and the average conversion time for a qualified lead. 

The first three metrics define how much revenue a sales rep brings in a given time period. As an example, if someone gets 20 new opportunities per month, wins 25% of them and they have an average deal size of 1000 MRR ... this leads to 5000 new MRR per month. 

My question: What does the sales velocity specifically measure, then? I realize that it's an efficiency metric, but I don't really know how to explain it to my team. If Tom has a sales velocity of 100 MRR and Lisa has a sales velocity of 150 MRR, what's the implication? 

How can you use the sales velocity for forecasting? Does it make sense to align this with any kind of sales target?

Thanks in advance!

Best,
Jonathan

1 Accepted solution
GuyTaylor
Solution
Guide

Sales Velocity per Sales Rep

SOLVE

Calculating what a rep can generate per day, month, quarter, etc.

One common way to predict a rep's sales is by looking at their sales history(all of it).

No need for sales velocity for this question, at least in my opinion. If you take a months worth of data and multiplied it by three to predict the quarterly results you will probably end up with inaccurate predictions. The one month of data used to extrapolate might be a unusally low/high sales month so it will not give a accurate prediction. 

Setting quotas 
How to set sales quotas or goals for your exact situation I am not qualified to say, perhaps you don't need them at all. But I can tell you one very common method is to look at sales history and/or compare reps to one another.

Examples:
-If your team did 100k in January of 2020 then the goal for January 2021 might be 110k.
-If mid-level sales performers average 100k each quarter then the quarterly goal might be 110k.


Other thoughts
I can see sales velocity being handy in certain situations but I'm not sure how much benefit it gives in the early stages of building a sales team. I would say best to first figure out your sales goals. If you have any historical sales data use that as a starting point.

As things progess and you get more data you can adjust your goals. Some patterns for success and failure will start to emerge. You can then dig into the data to try to explain these patterns which may include looking at sales cycle. Or you may find that in your situation sales cycle is not a important data point at all.

Guy Taylor | linkedhub.io

View solution in original post

6 Replies 6
JonathanV
Participant

Sales Velocity per Sales Rep

SOLVE

Thanks for your help Guy!

GuyTaylor
Solution
Guide

Sales Velocity per Sales Rep

SOLVE

Calculating what a rep can generate per day, month, quarter, etc.

One common way to predict a rep's sales is by looking at their sales history(all of it).

No need for sales velocity for this question, at least in my opinion. If you take a months worth of data and multiplied it by three to predict the quarterly results you will probably end up with inaccurate predictions. The one month of data used to extrapolate might be a unusally low/high sales month so it will not give a accurate prediction. 

Setting quotas 
How to set sales quotas or goals for your exact situation I am not qualified to say, perhaps you don't need them at all. But I can tell you one very common method is to look at sales history and/or compare reps to one another.

Examples:
-If your team did 100k in January of 2020 then the goal for January 2021 might be 110k.
-If mid-level sales performers average 100k each quarter then the quarterly goal might be 110k.


Other thoughts
I can see sales velocity being handy in certain situations but I'm not sure how much benefit it gives in the early stages of building a sales team. I would say best to first figure out your sales goals. If you have any historical sales data use that as a starting point.

As things progess and you get more data you can adjust your goals. Some patterns for success and failure will start to emerge. You can then dig into the data to try to explain these patterns which may include looking at sales cycle. Or you may find that in your situation sales cycle is not a important data point at all.

Guy Taylor | linkedhub.io

PatriciaFortuna
Member

Sales Velocity per Sales Rep

SOLVE

Hey Team, @JessicaH 

To clarify, I need to know if there's a dashboard model from Hubspot with the view of Sales Velocity (with the calculate)? If it exists, please could you share the link with me? I'm trying to build by myself, and it isn't very easy. Thank you!

 

GuyTaylor
Guide

Sales Velocity per Sales Rep

SOLVE

Hi @JonathanV, good questions.

Sales velocity is sales plus a speed component.

If you are not reaching your sales goals you would investigate things like: opportunities, deal value, win rate. Sales velocity says you are missing a speed component which is length of sales cycle. Everything else being equal you will make more sales if you decrease your sales cycle.

The idea is if someone or a team has poor sales you want to investigate why. The benefit to sales velocity is it captures sales cycle data so if the problem lives there you will see it.

Full disclosure, I'm a big fan of simplicity. Metrics like sales velocity, even tho they are not complicated in and of themselves, still increase complexity so that may have colored my answer.

Guy Taylor | linkedhub.io

JonathanV
Participant

Sales Velocity per Sales Rep

SOLVE

Hi Guy Taylor,

Thanks for your answer! As far as I understand this, the sales velocity equation excluding the numbers of opportunities gives me the amount of revenue that a sales rep can generate per day per typical deal. Now, including the number of opportunities in the pipeline, this should become the revenue a sales rep generates per day with his/her pipeline. If I multiply that by 30.3 or 91, this should lead to the monthly/quarterly capacity. The target for this sales rep should be aligned with this. 

--> Do you agree? I am not sure if my reasoning is correct. The reason I am asking is because or team becomes quite large and we have a rather complex structure of roles and responsibilities, so it would be extremely valuable from a sales enablement perspective to have a good understanding of everyone's monthly/quarterly capacity. My reasoning is also described in this white paper here (page 5, bottom).

Thanks already! And have a wonderful day. 

Jonathan

PS: Are you using the sales velocity equation yourself or do you prefer another metric for simplicity? 

JessicaH
HubSpot Alumni
HubSpot Alumni

Sales Velocity per Sales Rep

SOLVE

Hi @JonathanV,

 


Thanks for reaching out.
I want to tag in some subject matter experts to see if they have any suggestions.
Hi @MatthewShepherd @EmmaWashington @GuyTaylor, do you have any thoughts on this?

Thanks!
Jess  


Wusstest du, dass es auch eine DACH-Community gibt?
Nimm an regionalen Unterhaltungen teil, in dem du deine Spracheinstellungen änderst !


Did you know that the Community is available in other languages?
Join regional conversations by changing your language settings !