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Sales velocity is at the heart of sales effectiveness for business, commercial and mortgage lenders and may be a financial institutions most critical success factor. Sales velocity is your lag measure that is influenced by four key levers that directly impact the success of your sales initiatives.
The four key levers are your lead measures. Lead measures are those metrics that are predictive of the lag measure (sales velocity) and, simultaneously, influenceable by the salesperson.
Figure 1.0 illustrates the relationship of these metrics. Since the sales velocity equation uses only four lead measures, you can zero in on the sales strategies that will have the greatest impact on your sales effectiveness.
Once you identify the lead measure that needs the most improvement, you can focus on the activities that yield significant increases in revenue.
A 20% increase in A, B or C increases the sales velocity by 20%. A 20% decrease in D (length of sales cycle) increases the sales velocity by 25%. However, the Performance Insights 2020 research What Winners Do Differently revealed that a 20% decrease in length of sales cycle also improved the win rate by 20%. This means that a 20% decrease (say, 50 days to 40 days) in length of sales cycle improves sales velocity by 50%.
Think of it this way: achieving your few important goals is like trying to move a giant rock; but despite all the energy your sales team exerts, it does not move. It is not a question of effort; if it were, you and your team would already have moved it. The problem is that effort alone is not enough.
Lead measures act like a lever, making it possible to move that rock. Consider the two primary characteristics of a lever. First, unlike the rock, the lever is something you can move – it is influenceable. Second, when the lever moves, the rock moves – it is predictive. See Figure 2.0
To achieve a goal you have never achieved before, you must do things you have never done before. Look around. Who else has achieved this goal or something like it? What did they do differently?
Analyze your sales process and carefully decide how to improve it. Then select the few activities that will have the most impact on the lead measure. In our previous example, we could see that reducing the average time-to-close from 50 days to 40 days (20%) will increase sales velocity from say $10 Million per month to $15 Million per month (50%) – an example illustrated in Figure 3.0.
Continuing with the previous example, once you have decided to focus on a specific lever (Length of Sales Cycle) you will need to understand the sales activities that have the most impact on that lever. In this case, based on our research, there are three sets of activities that you should consider.
In the same survey, Moody’s Analytics asked, ‘What percentage of your sales cycle do you spend waiting for an applicant’s financial documents and information?’, to which bankers answered 30% to 50%. This means that about 40% of the sales cycle is waiting on a frustrated customer to provide financial documents.
If your average-time-to-close is 50 days, according to Moody’s data, you have about 20 wasted days in your process waiting for documents and playing document ping-pong. Reducing those 20 wasted days to 10 days improves your sales velocity by 50%.
This example illustrates the power of applying the right force (sales activities) on the right lever (average-time-to-close) to lift your giant rock (sales velocity).
Contact us for a copy of the research mentioned, or for a consultation on how to increase sales velocity.