Introduction – What is Pipeline Velocity?
Pipeline velocity is a measurement of how much revenue is moving through your pipeline over a period of time. It’s a relative measurement to understand if you’re moving in the right direction and a strong surrogate for understanding your path to accelerated growth. Additionally, it provides an ongoing feedback loop that gives you actionable insights for improving the velocity of your pipeline.
When measuring and reporting on pipeline velocity, a typical period of time is either monthly or quarterly, depending on your organization’s average sales cycle length.
Here is the equation for calculating pipeline velocity:
Why Does Pipeline Velocity Matters for Growth?
Many companies see a one-dimensional path to growth – build more pipeline by generating more sales opportunities. So, they work to manipulate only one variable in the pipeline velocity calculation – Number of Qualified Opportunities. Typically, companies will add Sales and Sales Development resources, or focus on Marketing Lead Generation, or both. But in reality, there can be a more efficient, more quickly recognized path to growth by also focusing on the other 3 variables of the pipeline velocity calculation.
To illustrate this concept, each of these executions would lead to the same revenue growth over a period of time assuming all other variables remain stable:
- Double the amount of qualified opportunities (e.g. 30 to 60)
- Increase win rate by 2x (e.g. 15% to 30%)
- Increase average deal size by 2x (e.g. $12k to $24k)
- Reduce sales cycle length by 50% (e.g. 120 days to 60 days)
How to Get Started on Your New Path to Growth
For the purposes of illustrating the concept, we’ve structured these steps in serial, though we know in practice, you’ll also be working on them in parallel. Laying the approach out this way is simply to aid in prioritization and focus.
The most efficient path to growth is to first focus on improving the win rate and sales cycle length metrics. This requires Sales Operations and Sales Enablement resources to maximize the effectiveness of your existing Sales & Marketing team. We call this Revenue Operations.
Revenue Ops Checklist:
- You have a standardized Sales Process that is followed consistently across the Sales team and documented appropriately in your CRM.
- You have methods to accurately track your progress on the 4 key pipeline velocity metrics over time. You’ve created a shared dashboard that the revenue team monitors frequently.
- You have defined criteria for a “Qualified Opportunity” that is tracked in the CRM.
- You have dedicated Sales Operations and Sales Enablement resources that can identify opportunities to optimize your Sales efficiency.
Once those variables are optimized and stable, through a consistent, optimized sales process, the next step is to load the funnel with qualified opportunities. The most efficient way to do this is through marketing. Only add sales resources once you’ve maximized the current output of your existing resources and confirm that other pipeline velocity metrics remain stable. We call this Growth Marketing.
Growth Marketing Checklist:
- Your website is optimized for conversions and has accurate analytics and tracking.
- You have a well-defined content strategy and dedicated resources to drive the Content Engine.
- You are driving MoFu & BoFu traffic via paid search
- You are driving ToFu traffic and MoFu conversions via targeted Facebook Ads.
Once you have a consistent process for driving new BoFu leads through growth marketing, it’s time to provide prospective buyers with more publicly available resources and tools, so they move farther down the sales process independently. The result is shorter sales cycles and higher win rates, as this process helps good prospects and helps bad prospects disqualify themselves from buying. We call this Buyer Enablement.
Buyer Enablement Checklist:
- You have a simple, transparent pricing structure that is published on your website
- Your website includes detailed product pages that answers common questions and helps prospects build/complete a requirements list.
- You have optimized the buying process that minimizes friction for the consumer (self-service e-commerce can be a great strategy for direct sales models with ACV < $10k)
- You have re-packaged your sales enablement tools and published them online as buyer enablement content
The Staggering Business Impact of Pipeline Velocity
The results of Revenue Engine Optimization with a focus on acceleration of pipeline velocity can be staggering.
When compared with a focus only on lead generation, you’ll see an increase in qualified opportunities, but not an overwhelming impact on annual pipeline velocity. Meaningful business growth acceleration occurs when augmenting all four key metrics in the pipeline velocity equation.