Our AMA (Ask Me Anything) series sees us put top sales enablement professionals on the spot to ask questions posed by YOU.
Josh answered questions on best practice when tracking a team's sales velocity and the processes you can put in place to improve it once you are able to track it accurately.
Q. Hi Josh, can you please explain what you mean by sales velocity, and the formula for working it out?
A. Sales velocity is a really simple way to track how effective your sales reps/teams are and whether they are improving or not.
Four simple numbers are all you need:
- How many opportunities they create
- What their win rate is
- What their average order size is (deal value)
- How long on average they take to close a deal (length of sales cycle)
Then use this equation:
Sales Velocity = Number of Opportunities x Deal Value x Win Rate / Length of Sales Cycle
Implementing this will mean the teams run a tight pipeline in their CRM with all the benefits that brings and can support data led 1-1’s, team meetings and coaching.
The other beautiful thing with it is that it supports marginal gains.
If you make a 10% increase to each one of the four points you make 47% more revenue!
Q. How have you gone about improving sales velocity at The Guardian? How long did it take?
A. I can’t share specific data about The Guardian, but what I can say is that pretty much straight away you can start to see results.
I have implemented this at other companies too and once you start tracking sales velocity you are then in a position to support data led 1-1’s team meetings and coaching.
Depending on your sales cycles, I would say that you need at least a quarter to evaluate, checking in each month. Obviously be aware of the wider things that will influence sales velocity like the market - so if there is a big dip in the market - like many companies have experienced due to Covid, you would naturally expect to see an overall dip in your teams sales velocity, but you will still have some reps outperforming others and tracking these numbers will help you get to the bottom of what the higher performing reps are doing so you can replicate on other teams/with other reps.
In a nutshell though, it depends on the current length of your sales cycle, but for most companies you should be able to roll out and see improvements in a quarter.
Final point - if your teams have weak CRM use, e.g. only creating opportunities when they are about to book, then you will need to have a period of time getting them running their pipelines properly, so you can get your baseline number before you start to look at rolling out any training/coaching to improve things.
Q. What method do you use for identifying SQLs at The Guardian?
A. With companies I have worked with, the gold standard is the BANT acronym:
- Budget - What their budget is
- Authority - In lead terms this would be that we have a relevant contact
- Need - What they are trying to achieve by purchasing your product
- Time - When they want the solution in place by - e.g. if they want to run a Christmas Campaign vs we want to buy an ad. That way, you have a better understanding of their timelines.
For the warmest marketing leads you will also need their permission to get in contact directly as well.
In reality there are degrees of gray. If you create a lead for one of your biggest target companies and you don’t have an understanding of the ‘Time’ element or the contact's job title, I’m sure you are still going to be sending that to the teams as an MQL.
Q. What are the best ways of overcoming push-backs from BDMs/sales management when implementing new initiatives around sales pipelines?
A. This is the biggest challenge of the enablement role: driving change particularly where it comes to using the CRM, and I would suggest a few things.
Firstly, most of us in enablement roles aren’t driving the processes; we are just trying to optimise it for the sales teams. If you look at your example of the pipeline - lots of sales teams like to run their pipelines on excel docs, notebooks, through keeping client emails unopened in their inboxes, post-it notes on their computers and all sorts of other weird and wonderful ways. BUT they are all running a pipeline. Just in a really inefficient way.
So I would always start by asking the leadership what they want out of their pipeline process. We can use our experience of Enablement to make suggestions here too. An example would be that we could suggest tracking closed lost business and the themes here as well as just the closed won business. Largely, you will end up with a list of requirements that sales leadership are quite excited about and probably can’t be built on a spreadsheet and definitely can’t be built on a post it note.
I would then ask them for two things.
- To agree to regular comms to the teams explaining the importance of this, highlighting and praising best practice and in 1-1’s calling out people not following the process. If you estimate the project will take three months - then sign your senior stakeholder up for e.g a fortnightly email that you will help them write and a monthly meeting for four months (so you have a bit of wriggle room).
- To help me identify a sales manager and sales reps that are relatively amenable to change, and ideally already seen as successful in some shape or form.
I would then work with that team - using my senior leadership sponsor to provide me with the carrots and sticks needed.
I would be getting the sales manager to present back to the senior sponsor with me every month and then when it is fully implemented with that team get the senior sponsor and the sales manager to present to the wider teams for the next roll out.
For something like sales velocity, which they may not know about - you could present it as a suggestion and if the leadership team like it, then you should ask for those two conditions and then take it from there.
NB: Running a decent pipeline in a CRM is critical to being able to track the teams sales velocity anyway - so is a nice extra benefit that you can pitch to the senior leadership team.
Q. How do you determine how long your sales cycle should be? And what’s the minimum length of time we should be analyzing?
A. Regarding the sales cycle, this completely depends on what you are selling. I’d have a look at what the average currently is for your teams and then try and standardise that across the teams and reps you are tracking.
It might also be worth looking at how you track other activities. If the rest of your data is tracked monthly or quarterly, then you might decide to work it out on a monthly basis so that it works in tandem with your other reporting.
Regarding the second part of your question, if you know what your average sales cycle is, then if it is e.g 30 days, then I would allow 30 days to ensure that everyone is using the processes properly and, assuming they are getting your benchmark. Then I would allow three cycles i.e. 90 days with this example to allow for training/coaching and monthly tracking of results.
Q. Can you provide some tips for increasing pipeline quantity and quality?
A. This is going to sound a bit glib, but for the sales team, if they want to increase their quantity they need to speak/contact more clients and contacts and if they want to increase the quality they need to be making sure the contacts they are speaking to are the right ones and then improve the quality of their conversations - which basically means good questioning and insight.
If you set up the CRM so you can track their sales velocity, you can measure these things.
- Quantity - the number of opportunities
- Quality - their win rate, how long it takes them to do deals and their average order value.
You can then run a brainstorm/coaching session with them to look at what they can do to improve these things. Agree the actions, tell them what their current sales velocity is and that at the end of e.g. the next month you will all meet up and review the impact- are they now creating more opps than before, are they winning more opportunities than before, are they doing the deals quicker, what has happened to the average deal value?
That way when you meet back up e.g a month later, you will have the data to see whether the things you and the team decided to do made a difference and then go from there.
I have run these sessions before and having hard data in sales training sessions is really helpful. e.g. Currently as a team we create xxx opportunities a month. What can we do to improve this? Then meet 30 days later and see what has happened. Really helps get the teams engaged with the training and bed in the actions.
Q. Is time spent on reducing the length of the sales cycle is well spent? Is it worth focusing resources away from activities like increasing things like pipeline or win rate?
A. Something to bear in mind re sales velocity is that it supports marginal gains. By increasing each of the 4 levers by 10% you end up making 47% more money. If you were to try to drive 47% revenue growth by simply creating more opps that would be a real stretch, but this enables small (maybe easier) wins in each area which add up to a bigger win rate.
The other point to answer your question directly though, is that in Sales training and coaching there are a lot of different theories about what is the best approach, and they can't all be right! But, I would say that the old quote of 'time kills deals' is definitely true. An aging opportunity forgotten/ignored by sales will often die, so focussing on time is never a bad place to start as it will probably encourage the teams to speak to more senior client contacts, send more impactful proposals that contain some kind of sense of urgency/scarcity which will all push up your win rate. It will also encourage them to kill off old opps and start creating new ones, which has got to be a good thing too!
Q. Besides using it to gather the data points for the sales velocity equation, how else do you leverage the CRM in this scenario? Are you able to create meaningful dashboards/reporting for velocity? Associate the velocity score with opportunities? Connect it with your LMS?
A. It's definitely worth building the sales velocity into your CRM so that the managers can use it for real time data in their 1-1's and team meetings.
If the teams are using the CRM well for managing their pipelines (which is essential for tracking this anyway) then you will be able to build this in pretty standard (resist the urge to overcomplicate) dashboards.
In Salesforce, you could use Matrix Reports to show how it is growing/declining.
That way, for sales leadership they can see very quickly:
- Are my team creating more opps than in the past?
- Are they closing more of those opps than in the past?
- Is the yield increasing?
- Is the time it takes for them to do these deals decreasing?
- What is the overall sales velocity?
Five pretty straightforward stats - but pretty transformative for how you track the sales team and make sure it is getting the support it needs.
You can follow the same model for leads too, which also works really well.