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Understanding Sales Velocity in Stack

Sales velocity is a key metric that measures how swiftly opportunities transition into "Won" status, thereby generating revenue. Understanding this can help you optimize your sales processes and forecast future performance.

Calculating Sales Velocity​

The formula for sales velocity is:

Sales Velocity = Total Sales (in USD) / Average Sales Cycle (in months)

Components of Sales Velocity​

  • Total Sales Value: This is the total sum of the value of won opportunities within a selected time range.

  • Average Sales Cycle: Calculated as the total sales duration divided by the number of opportunities won.

  • Total Sales Duration: The cumulative duration of all won opportunities.

  • Length of Opportunities Won: The time difference between when an opportunity is created and when it is marked as won.

Simplified Formula​

In simpler terms, sales velocity can be expressed as:

Sales Velocity = Monthly Sales Value

Where:

  • Monthly Sales Value = (Total Sales Value / Normalized Average Sales Cycle in months)

Example Calculation​

To illustrate, consider a scenario where three opportunities are marked as won within a week:

  • Opportunity #1: Created on December 1st, marked won on December 20th (20 days open), with a sales value of $30.
  • Opportunity #2: Created on December 15th, marked won on December 21st (5 days open), with a sales value of $50.
  • Opportunity #3: Created on December 21st, marked won on December 22nd (2 days open), with a sales value of $70.

Calculation Steps​

  1. Total Sales Value: $30 + $50 + $70 = $150
  2. Total Sales Duration: 20 days (Opportunity #1) + 5 days (Opportunity #2) + 2 days (Opportunity #3) = 27 days
  3. Average Sales Cycle: 27 days / 3 won opportunities = 9 days
  4. Average Daily Sales Value: $150 / 9 days = $16.67 per day
  5. Monthly Sales Value: ($150 / 9 days) * 30 days = $500 per month

Thus, the Sales Velocity is $500 per month.

By understanding and optimizing these components, you can enhance your sales efficiency and drive better results with Stack.