B2B Street Fighting Blog

how your negotiations impact sales velocity

Posted by K. (Karen) G. Fraser on Thu, Oct 24, 2013 @ 04:21 PM

how your negotiations impact sales velocityYou may have heard the buzzwords ‘Sales Velocity’ recently, but what exactly is it and how can your negotiations impact it?  Sales Velocity is described as how much money you are making and how quickly are you making it.  More simply put, if you consider driving, driving velocity is expressed in miles per hour.   Sales Velocity is expressed as money per day.

Sales Velocity is measured using this straightforward calculation:

Sales Velocity=Number of Leads x Win Rate % x Average Deal Size

                                         Average Sales Cycle

For example:     25 leads x 10% win rate x ¤20k avg deal size
                                      65 day avg sales cycle                           = ¤769 per day

Now that you know what Sales Velocity is, do you need to take notice of if?  Absolutely! Most businesses use sales velocity as one of their performance metrics.  No doubt your own company uses sales velocity, too.  If you are a sales executive, or lead a sales organization, or are in a function that impacts sales, you need to be aware of Sales Velocity. Velocity has a direction.  A company’s sales organization, products and services, and marketing campaigns drive the direction for the company’s Sales Velocity.   

The easiest way to increase Sales Velocity is by increasing the number of leads, improving the win rate, and / or increasing the average deal size while decreasing the length of the sales cycle.               

So how can your negotiations impact Sales Velocity?  There are a few very important ways that your negotiations can impact Sales Velocity:

  1. Ensure you are working on the right deals – your sales assessment and qualification process should help you do this. Focusing on deals that you can win, and that are worth winning, will impact the Sales Velocity.
  2. Next, for every major deal that you plan to pursue, early in the lifecycle of the deal, do a Consequences of No Agreement (CNA) analysis.  This will help you to understand who has the power in the deal, and will highlight the buyer’s decision criteria and your solution strengths and weaknesses compared to the buyer’s preferred alternative.  Review and update the CNA analysis frequently through the lifecycle of the deal. 
  3. Take time to review and verify the buyer’s decision criteria.  Then emphasize the differentiated value your solution can bring that directly relates to what is important to your buyers.  Remember to do this often. When done well, tailoring your messages to your buyers’ interests can help create a sense of urgency which can have a positive impact on deal size (and win rate).
  4. Another way to impact deal size is to carefully consider trades. The level 2 and level 3 trades that you offer should be low cost to you but high value to the other side while linking value to what is important to the buyer. Examples: an invitation to one of your company events that your key contact has shown an interest in; or an introduction to someone in your network that your customer might find helpful.
  5. And lastly, prepare and package your offers with titles that clearly outline the value of each offer to the buyer.  Titling offers distinctly helps to embed the value of the offer for the buyer, and helps to keep the negotiation discussion very focused.

Now you are aware of how your planning and preparation for negotiations can have a significant impact on Sales Velocity. 

Want to learn more? Send an email to karen@e-thinkinc.com.

Tags: negotiation skills for sales

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