Correlating Sales Enablement’s Impact on Revenue Through Sales Velocity
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For the revenue organization, there is no better indicator of overall health than sales velocity. The rate at which deals are moving through the pipeline and leading to more revenue is not only an indication of the quality of an organization’s product or services, but also of the mindset of teams across the revenue organization toward supporting collective growth for the business.
“Sales velocity is the equation that any leader needs to look at to try and capture how fast a business is making money,” said Leon Hassid, sales enablement and training lead at SecurityScorecard. “In simple terms, a higher sales velocity means you’re bringing in more revenue in less time, which is a dream world in my mind.”
The last thing any revenue-facing rep wants is stagnation. This means that reps need to be equipped with the tools, resources, and skills they need to move opportunities forward in the sales process. But with a low-volume pipeline, or one that is clogged with low-quality leads, even the most skilled reps will struggle to drive revenue growth.
Sales enablement can play a pivotal role in uncovering weaknesses in the sales process, identifying opportunities for improvement, and coordinating the efforts of revenue-facing teams to optimize sales velocity and drive revenue growth. This requires practitioners to have a thorough understanding of what sales velocity is, what factors they can control as well as those they cannot, and how to correlate sales enablement programs to outcomes.
The Sales Velocity Formula
Sales velocity can be calculated with an equation that relies on four key elements: for a given period, the number of opportunities is multiplied by the average deal size or selling price as well as the win rate, and this number is divided by the average sales cycle length.
Sales Velocity = (# of Opportunities × Average Deal Size × Win Rate) ⁄ Sales Cycle Length
To better understand how sales enablement can influence velocity as a whole, it’s important to first understand the underlying variables within each of these four elements.
- Number of Opportunities: This refers to the number of leads or potential buyers within the pipeline. However, it is important to note that more opportunities do not necessarily mean more deals won. The number of opportunities in the pipeline is highly reliant on quality. If opportunities slip into the mix that are not relevant to an organization’s target audiences or have a low probability of converting to customers, it can actually obstruct velocity by wasting time and resources from revenue-facing teams. Therefore, it is critical that enablement work with the sales, marketing, and operations teams to implement stringent guidelines for qualifying leads.
- Average Deal Size: Various organizations may use different terms to refer to this, such as deal value or average selling price. The gist of this factor, however, is relatively the same regardless of the specific term. It refers to the value generated as a result of the won sale. Simply selling more is not necessarily an indication of success, particularly if large amounts of effort are expended by reps with little return in the form of revenue. Enablement must ensure that reps are equipped with the skills, knowledge, and resources they need to secure sales at the prices or sizes that they want.
- Win Rate: This is calculated by looking at the number of deals won divided by the overall number of opportunities in the pipeline. An organization’s win rate is a key indicator of the health of the sales pipeline, as it can uncover weaknesses in the qualification of leads, abilities of revenue-facing reps, or obstacles in the buyer’s journey that prevent opportunities from converting to wins. Sales enablement must monitor this closely in order to identify patterns that are potentially standing in the way of reps’ ability to close deals.
- Sales Cycle Length: In contrast to the other three factors, sales velocity is in better shape if the sales cycle length is decreased rather than increased. The less time it takes to move an opportunity through the pipeline to a closed sale, the quicker the organization will reap the benefits of its efforts by way of revenue. Therefore, enablement needs to continuously assess the sales process to streamline processes and address any gaps that are slowing the sale at various points in the buyer’s journey.
Often, each of these four metrics are critical factors that leaders look at regularly to understand sales performance. When looking at these in the context of sales velocity, however, sales enablement is able to design programs to pinpoint and manipulate the underlying aspects of the formula to result in faster revenue generation for the business.
“[For sales enablement], it’s about bringing them together to paint a more complete picture around how much money we are really making on a [regular] basis,” said Hassid.
Factors in Enablement’s Control
Once these metrics are tracked regularly and patterns are revealed, there are a number of ways that sales enablement can impact the outcomes on an individual, team, and organizational level.
“I think a very simple formula around sales velocity provides a launching point to a myriad of conversations that you can have with your business leaders, and you can tie a variety of those metrics to many different sales initiatives across the board,” said Matt Bills, SVP of sales enablement and CRM director at Fulton Financial Corporation.
Consider a few of the following examples:
- Enhance Lead Qualification: The quality of leads entering the pipeline is critical to driving sales velocity, as it directly affects every core aspect of the formula. Whether those leads are marketing generated, inbound through referrals or organic recognition, or outbound through prospecting efforts, enablement can help ensure that the methods for qualifying leads across the revenue organization are prioritizing only those which have the potential to generate value.
“You will not be able to create predictable revenue unless you can create predictable pipeline or leads,” said Aaron Ross, co-chief executive officer at PredictableRevenue.com. “They are your lever for growth; predictable leads will drive growth.”
- Improve Core Competencies: Once those qualified leads come in, however, a great deal of responsibility still resides in the rep’s ability to turn that opportunity into value for the business. By identifying the core competencies needed to drive results, enablement can implement training and coaching programs to target the key behaviors that lead to results. For example, if the number of qualified opportunities is high but win rate remains low, enablement might launch a training program aimed at improving reps’ closing abilities.
“We are seeing a direct correlation to higher win rates and shorter sales cycles as a result of improving the sales effectiveness skills,” said Terry Mitchell, director of sales enablement at Fujifilm. “We believe that our efforts to develop these personal development plans and then improve our skills is really making a big contribution to our overall success.”
- Drive Revenue Team Collaboration: Sales velocity does not solely depend on the activities of individual sales reps, but rather is a result of efforts across revenue-facing teams, from marketing to sales, account management, customer success and services, and more.
By working closely with leaders of each of these revenue teams, sales enablement can tailor programs to each department’s individual goals, and improve opportunities for partnership. For example, enablement can help streamline processes to hand off closed-won opportunities to the post-sales teams to ensure they are properly equipped to continue to derive value from those customers over time.
External Factors Influencing Velocity
While there are many strategies enablement can employ to influence sales velocity, there are also many factors outside of the direct control of sales enablement that can impact this number. In order to better correlate enablement’s efforts with impact on sales velocity and ultimately revenue growth, it’s important to understand the ways in which market fluctuations and industry trends can impact sales velocity. Consider a few of the below examples:
- Competitive Pressure: Actions of competitors can quickly sway the expectations of buyers, such as widespread price dropping, new hires and turnover, or updates to their offerings.
- Economic Fluctuations: Large-scale economic shifts such as recessions can have massive repercussions across all aspects of a business as well as dictate the actions of customers and prospects.
- Market Saturation: Mergers and acquisitions without a doubt result in disruption within the impacted organizations as overarching business strategies adapt and evolve. At the same time, such changes can often shake up an industry as a whole, impacting competitive strategies and potentially cascading into further consolidation.
- Regulation or Process Changes: Changes to regulatory policies or processes can impact how companies conduct business. For example, shifts in federal requirements for certain certifications can elongate the sales cycle.
With this understanding, enablement can not only better focus its own efforts toward factors within its control, but also better position those efforts with executive stakeholders in a way that demonstrates clear correlation between programs and outcomes.
“It’s very important to have your story and your narrative very crystal-clear and representative of what’s happening in the market before you go to your senior leadership and claim success,” said Hassid.
Using Velocity to Prove Enablement’s Impact on Revenue
In demonstrating how sales enablement influences revenue, it is important to keep in mind that correlation does not mean causation. While sales enablement can certainly implement programs that influence the sales velocity number, it is just one piece of the puzzle that determines revenue generation for the business, especially considering the many external factors discussed prior.
“Is [sales velocity] all because of sales enablement? No,” said Kunal Pandya, director of global sales enablement at UserZoom. “There are plenty of factors in there. But do they demonstrate leading indicators of behaviors or patterns? If I can point towards that area, then yes. That’s how we start to correlate [enablement and revenue impact].”
To effectively show how enablement efforts correlate with improved sales velocity and ultimately revenue growth, consider the following:
- Focus on one factor at a time: Break down each section of the sales velocity formula and pinpoint one factor at a time with each initiative. This will help practitioners better track the before and after state of the metric in question, and attribute improvement to their efforts. This approach also helps in communicating results to stakeholders, as it makes the information more digestible, and therefore easier for stakeholders to connect the dots between the initiative and outcomes.
- Compare results across different time periods: Sales velocity is meant to be calculated for a given time period. Therefore, assessing it over weeks, months, or quarters will reveal different patterns. Comparing a multitude of periods with each other helps normalize the data and remove potential for external factors to sway results.
“Ultimately what we’re doing is then tracking all of those metrics month over month, year over year, quarter over quarter, to understand, how are the dynamics of those different areas changing,” said Bills. “Are we seeing success? Did we actually convert more opportunities because we gave them a different lead set? And that snowballs from there into a variety of different avenues.”
- Think multiple quarters ahead: Due to the myriad of factors involved in sales velocity, results often require some time to take hold. Therefore, it is important to map out objectives multiple quarters in advance so that enablement can launch the initiatives needed to generate those outcomes well in advance.
“Let’s assume that in Q3 and Q4 of a year, I want to be able to improve the sales cycle duration and shorten it by 30 days,” said Hassid. “That means that I should be thinking about the things I want to roll out in Q1 and Q2 that will have an impact on that. You execute on those initiatives, and then you have to wait and let the numbers speak for themselves.”
Sales enablement can be a crucial partner in driving revenue growth for an organization. Using sales velocity as a guiding equation to set objectives, design successful initiatives, and demonstrate results, sales enablement can correlate its efforts to revenue and elevate its purview as a strategic business discipline.
“Own the outcome,” said Hassid. “Be confident in your ability to have a direct impact on the bottom line. Using sales velocity to measure your performance gets you that.”