How quickly do leads move through your sales pipeline? Every sales manager knows that the longer a lead stays in your pipeline, the less likely it will close. Knowing the total value of your sales pipeline is not enough. You need to also know how quickly they’ll move through each stage of the pipeline and turn into actual revenue. By monitoring your pipeline velocity, you will be able to predict future sales more accurately.
Here are 4 key metrics that you can measure to improve your sales pipeline velocity
1. Qualified leads
Qualified leads are the leads who have gone beyond contacting you and shown actual interest in buying your product (by signing up for a trial, requesting a quote, scheduling a demo, etc). It’s a key factor that impacts the pipeline velocity. Only a fraction of qualified leads move through the sales pipeline. So the more qualified leads you can generate, the better it is for your business.
To begin with, you can monitor the number of qualified leads you’re generating every month. This will help you measure your performance against your monthly targets. It will also enable you to see how your lead generation tactics and marketing efforts impact your business. Ideally, this metric should grow over time. If it isn’t where you’d like it to be, then it’s a good idea to focus more on marketing and drive more leads.
You can further break out lead volume into qualified leads by each source. This will tell you which sources are the most effective ways of generating leads for your business.
2. Win Rate
Win rate is the percent of leads that finally convert to actual sales. Each sales pipeline has many stages and there is some amount of churn at every stage. By monitoring win rate at each stage, you can find out where you’re losing potential customers, why they’re dropping off and what you can do to close more deals.
The trick is to clearly identify the leaky stages in your pipeline where prospects drop off, work with your team to address the reasons why, and to improve the customer journey from initial contact to sale.
In addition to measuring the total win rate, you can go deeper and monitor the win rates for each stage of your sales pipeline. This will help you identify areas that need more training & resources, improve conversion rates and boost lead velocity as well.
You can even break out win rate by lead source or channel. This will help you identify the most converting lead generation sources for your business. Comparing win rates across channels will tell you how effectively each source is able to convert qualified leads into actual sales. Using win rate with lead volume can give you a clear idea about how each channel impacts your revenues.
3. Deal Size
Deal size is the average value of won deal and is an important metric that impacts the velocity of your sales pipeline. Typically, larger deals move slowly through the pipeline while smaller deals move quickly. Also, you need different tactics and resources to close larger deals as compared to smaller ones. By analyzing the past deals won by your team, you can find out the average deal size you’ve had most success in closing and note the steps your team took to close those deals. This will give you a good idea about your target customer, how to find them and how to close more deals with them.
Deal size allows to segment your customers and tailor your marketing strategy for each segment. For example, big ticket customers would like to personally meet some of your top management before closing the deal. Medium ticket customers would like a demo or a webinar. Accordingly, you can refine your pipeline or even create separate sales pipelines for each segment. This will not only help you close more deals but also increase your deal size.
4. Sales cycle length
Sales cycle length is the amount of time it takes for a lead to move from initial contact to a sale. If your leads take a lot of time to move through the various stages of your sales pipeline, then it can seriously hinder pipeline velocity.
If time to close is short, you can identify what type of customers converted quickly and what steps you had taken so that you can repeat it in future. If the sales cycle is too long, you can spot such leads beforehand and take steps to close the deal sooner. They may have specific requirements, which you can find out and proactively fulfill early on to shorten the sales cycle. It may also be because your sales reps need more training in certain stages of your pipeline. By coaching your reps, you can enable them to shorten the sales cycle and boost pipeline velocity.
Initially, you can create a simple sales dashboard to monitor each stage of your sales pipeline and share insights with your team. Monitoring it every day/week will tell you how your marketing efforts & lead generation tactics are performing. You can always add more metrics to it when you feel the need to track more information.
Regularly monitoring each stage of your pipeline will enable you to identify bottlenecks and fix them quickly. It will also help you identify areas where you need to provide additional training and resources to sales reps.
Basically, there are 3 fundamental ways to improve sales pipeline velocity – generate more qualified leads, increase average sales win rate or shorten your sales cycle. Improving any one factor will bring obvious benefits. But methodically improving all 3 factors will have a multiplier effect on your sales performance and dramatically improve your revenue predictability.