As a sales leader, you’re likely feeling good about your pipeline. Your reps are generating revenue, your average deal size is decent, and you feel set up for success. However, understanding the average customer lifetime value (CLV) is crucial for grasping long-term revenue generation, especially in subscription-based businesses. Yet, despite all these positive indicators, your actual revenue is lagging, and your sales cycle is longer than it should be. The problem isn’t your pipeline—it’s your sales pipeline velocity.

What is pipeline velocity?

The data is clear: companies that focus on pipeline velocity metrics see 28% higher revenue growth than those that don’t. Yet, only 24% of sales teams measure and track this critical metric. If you’re a $5M or less Annual Recurring Revenue (ARR) company, this is both a major problem and a huge opportunity.

Sales velocity is critical to revenue leaders because it directly impacts forecasting and sales performance. To stay competitive, it is essential to calculate sales velocity accurately, emphasizing the importance of measuring and tracking this critical metric. Long sales cycles and inconsistent revenue are often blamed on a variety of issues, but they’re usually symptoms of poor sales velocity. Teams waste time chasing deals that will never close, while competitors are optimizing their sales velocity to outmaneuver them in the market.

Sales velocity metrics that matter

Sales velocity is often misunderstood as a standalone metric, but it’s actually a calculation that rolls up multiple critical sales performance metrics. To understand why, let’s break down the components that matter and how they impact each other.

These sales metrics are interconnected in ways you might not expect. For example, a sales team might be thrilled to increase their win rate from 20% to 30%, but if they’re doing so by spending more time in the pipeline (e.g., extending their average sales cycle from 60 to 90 days), their overall sales velocity and revenue potential may actually be decreasing. Or, they might focus on chasing bigger deals to increase their average deal size, but larger contracts often take longer to close, further slowing velocity.

Additionally, understanding the average deal value is crucial for measuring business performance and sales effectiveness, as it helps in calculating sales velocity, analyzing sales pipeline metrics, and refining sales strategies based on insights derived from average deal values.

Forecastio build a dashboard for busy sales leaders to track the most important sales performance metrics in real-time. Book a demo to discover how our platform can improve your sales efficiency and goal attainment.

What matters most in your pipeline

Many sales teams are focused on one or more of the following goals: growing their pipeline, increasing their win rate, or upping their average deal size. While each of these objectives is important, optimizing for any one of them exclusively can be counterproductive.

A big pipeline is not inherently a good thing if it’s full of low-quality leads that are wasting your sales reps’ time. And focusing on bigger deals is a great way to strangle your revenue growth if you’re not careful—larger contracts often take longer to close, which can kill velocity.

Understanding the length of sales cycle is crucial as it helps determine the speed at which deals move through the sales pipeline, influencing the overall revenue a company can expect to generate during that cycle. A faster sales velocity is a hallmark of a well-oiled machine, and it’s critical to forecasting and revenue growth.

The best teams know that qualified leads are the lifeblood of sustainable revenue growth. They understand that a consistent flow of high-quality opportunities is far more important than a big pipeline, and they consistently outperform their peers by optimizing their sales process for efficiency and effectiveness.

How to increase sales velocity

Optimizing your sales process is the key to high sales velocity. Sales velocity measures are critical for assessing the time it takes for sales teams to move deals from opportunity to closure. One of the best ways to increase your pipeline is by refining your process to remove friction and obstacles that slow deals down. Every sales team has hang-ups at different stages of the sales cycle, and addressing these issues is critical to optimizing your process.

In complex B2B sales, technical validation is often where deals go to die. While it’s important to thoroughly validate technical fit, timing is everything. Teams that have technical discussions earlier in the sales cycle see opportunities move 40% faster through later stages. This is because they’re identifying and addressing (or disqualifying) deal-killers early on.

Why fast sales velocity matters to revenue

When you optimize your sales velocity, you’ll close deals faster, but that’s not the biggest benefit. Understanding the sales velocity equation is crucial as it helps diagnose friction points in the sales cycle, measure business health, and make informed decisions about improving sales performance and team expansion. A faster pipeline means a more predictable revenue stream, with a consistent flow of deals moving through each stage of your sales pipeline.

This predictability is transformative because it gives you complete visibility into future revenue. When you know your true sales velocity, you can accurately forecast future revenue and plan accordingly.

This data-driven approach means you can staff your team at the right time, hire additional reps when you need them, and allocate resources based on hard numbers rather than hunches. Sales managers can confidently forecast quarterly performance and identify issues early enough to course-correct.

When sales velocity is optimized, your sales team is more productive by nature. They can focus on opportunities that follow your pipeline’s proven path to success rather than chasing every lead. This targeted approach improves conversion rates and keeps reps happy with more frequent wins and shorter paths to commission.

Advanced sales pipeline strategies

As sales teams and organizations mature, your approach to pipeline management must evolve. Top performers use advanced analytics to optimize performance at every stage of their sales pipeline. Understanding the sales velocity formula is crucial as it provides a detailed explanation of how to calculate and improve sales performance.

Sales velocity metrics are critical to revenue leaders because they help you forecast future revenue and evaluate the effectiveness of your sales strategy. By analyzing your deals’ progression through your pipeline, you can identify the activities and factors that drive velocity and replicate those across your pipeline.

Perhaps the most surprising way customer satisfaction comes into play is your sales cycle length. Faster deal progression is not the enemy of happy customers; in fact, when done right, it can lead to higher scores. This is because a streamlined sales process is often more buyer-focused and aligned with the seller’s solution.

How to measure pipeline progress

Managing your pipeline by intuition and stage-by-stage progress is a thing of the past. Modern sales teams use data to understand the factors that impact their sales velocity. This analysis often reveals counterintuitive truths about what sells and what doesn’t.

Sales velocity measures are critical for assessing the time it takes for sales teams to move deals from opportunity to closure. Knowing the sales velocity formula (number of opportunities, average deal size, win rate, and sales cycle length) can help you identify and address sales cycle issues.

Many teams are surprised to find that deals with multiple stakeholders upfront move 45% faster than those that bring in late-in-the-game stakeholders. It contradicts conventional wisdom, which often recommends waiting until later to engage busy decision-makers and additional stakeholders.

Similarly, deals that include ROI models or key success metrics in their initial proposals close 35% faster than those that save it for negotiations. These are just a couple of examples of how the right conversations early on can make a huge impact on velocity.

What your CRM data isn't telling you

Most CRM systems, including HubSpot, provide basic pipeline data. But knowing how to analyze that data is what separates insight from nonsense. Calculating sales velocity is critical because it ensures you're looking at truly sales-ready opportunities, and not wasting time on unqualified leads.

That's where Forecastio's automated sales forecasting and sales performance management platform comes in. Forecastio integrates seamlessly with HubSpot to analyze your historical performance data, current trends, and pipeline patterns to show you exactly where and how to optimize your sales process for revenue growth.

Real-time pipeline visibility is where the magic begins. Forecastio's sales pipeline dashboard gives sales leaders like you early warning signs of issues before they become revenue problems. You'll see exactly how your pipeline is trending at any given time, so you can optimize your sales process before it's too late. This means no more waiting until the end of the month to find out you're behind on your numbers.

How to forecast revenue

Your grandma could forecast sales quotas based on pipeline multipliers, but times have changed. The sales process is too complex and variable to rely on intuition or basic pipeline multipliers. Top-performing sales teams know that accurate forecasting requires a new approach that takes into account the complexities of today’s sales process and pipeline.

One crucial metric for understanding long-term revenue generation is the average customer lifetime value (CLV), which is especially important for subscription-based businesses like SaaS companies.

When sales teams analyze their sales velocity metrics, they often find surprises that improve their forecasting. For example, knowing how sales cycle length varies by deal size gives you a more accurate view of your pipeline. Additionally, looking at the average sales cycle length (the time it takes a customer to buy) instead of the sales cycle stage reveals even more accurate revenue projections.

Enterprise deals take 2.5 times longer to close than mid-market deals but are worth three times the average deal size. Knowing this, sales leaders can create more accurate forecasts and staff their teams accordingly.

Forecastio’s forecasting model simplifies this complexity. Our platform analyzes your team’s actual performance patterns, deal progression rates, and seasonal trends to provide increasingly accurate predictions. This automated analysis gives sales leaders a clear view of how much revenue they can expect, and when.

How to scale your sales process

As you grow beyond your initial success, maintaining optimal sales velocity is more challenging. Understanding the importance of average deal value is crucial for measuring business performance and sales effectiveness.

Higher sales velocity is a good problem to have because it means you’re more efficient and effective as an organization. More deals, larger sales teams, and additional market segments introduce new complexities for sales performance management. But they also present opportunities for growth.

How to build a high-performing sales team

Top-performing sales teams build their process around data and sales velocity measures, which are critical for assessing the time it takes for sales teams to move deals from opportunity to closure. This data-driven approach creates a culture of continuous improvement, where you make decisions based on actual performance instead of intuition or outdated methods. Sales managers can quickly see which deals are at risk and why, so they can coach more effectively and allocate resources wisely.

Hiring additional sales reps to manage leads and increase specialization within your team is critical to optimizing sales velocity. Top performers find that their average deal size naturally increases when they optimize for sales velocity.

By focusing on deals that follow their proven velocity paths, they close more quickly and secure higher-value contracts. This is because deals that move at a healthy pace through your pipeline are often a better fit for your solution and more aligned with your buyer’s needs.

What your sales team will face next quarter

Your historical sales pipeline reporting isn’t enough to prepare you for the next quarter. Modern sales teams need predictive insights to prepare for what’s around the corner. Increasing the number of opportunities in your pipeline is one of the best ways to improve sales velocity.

Knowing your pipeline velocity trends gives sales leaders early warning signs of issues before they become revenue problems. This proactive approach is critical as market conditions and buyer behavior change over time.

Understanding your average customer lifetime value (CLV) is crucial for grasping long-term revenue generation. Seen through the lens of sales velocity, it’s even more revealing. Sales teams often find that deals that close within their optimal velocity range lead to longer, more loyal customer relationships. This is because buyers who move through your pipeline at a healthy pace are often a better fit for your solution and more aligned with your long-term business goals.

What's next

Changing how you approach sales velocity takes work, but the payoff is worth it. Top-performing sales teams see their forecast accuracy soar to 85% or higher. They enjoy higher average deal sizes without longer sales cycles. Their sales reps maintain high win rates while managing larger pipelines. And their customers are happier because their sales processes are better aligned with needs.

Forward-thinking sales leaders know sales velocity is more than just another metric to monitor. It's a key indicator of your sales organization's health and potential. By understanding and optimizing this critical metric, you can transform your revenue growth from unpredictable to systematic, and reactive to strategic.

The sales velocity formula (number of opportunities, average deal size, win rate, and sales cycle length) is critical to diagnosing sales cycle issues and improving your sales team's effectiveness.

The future of your business depends on it. Those who ignore pipeline and sales velocity metrics will continue to fly blind, struggling to keep up with the competition. It's not a matter of if you should optimize your sales velocity, but when.

Ready to transform your sales velocity into predictable revenue growth? Schedule a demo with Forecastio today to see how our platform helps you measure and improve your sales performance.