Before discussing how to increase your pipeline velocity, it is crucial to know what exactly pipeline velocity is. In sales, a pipeline is a metaphor for the many different phases a contact goes through until the deal is closed. Pipeline velocity refers to the speed at which a contact travels through the pipeline to become a closed deal.
In physics the formula for calculating velocity is as below:
Similarly, the formula for pipeline velocity is:
From this formula we can assume that in order to increase pipeline velocity, you can:
1. Increase Number of contacts, Average deal and Conversion rate
Due to the positive relationship, the increase in the number of contacts will increase your pipeline velocity. However just adding excessive contacts which avail to nothing, will decrease your conversion rate. Therefore it is important to only include quality contacts that can be converted into clients.
Similarly, having bigger deals can also increase your pipeline velocity. Having more leads converted into clients will increase your conversion rate which will in turn increase your pipeline velocity.
There are many ways to increase these three variables. First of all you need to determine what makes an ideal client, and then find them. In the case of a single person, the parameters used to determine whether they are ideal or not could include their age, location, job/title. For a company that could include the average revenue, number of employees and location. Now you mostly have quality leads that have a high possibility of getting converted.
Second, measure your conversion rates by stage in the pipeline. Figure out at which stage you are losing clients, and “why” you lost your clients and make efforts to improve your services at that stage.
A way to increase conversion rate, is to find your client’s pain point and offer solutions that will directly alleviate the pain. This will result in your customers learning how they will benefit from your product.
2. Decrease Time Period
The other way to increase pipeline velocity is to simply close deals faster. Which is easier said than done. One option might be to decrease the free trial period. When you give clients a month (or so) free trial, they might not start using the product immediately thinking they have a lot of time to decide. However, they will use your product as soon as possible, if you cut the free trial period in order to avoid making the wrong decision. The faster they decide they want the product the faster your product will move through the sales pipeline.
Your pipeline velocity serves as a metric to measure your sales success. However more than the value of your pipeline velocity, what matters is the change in velocity across time periods. So as long as your velocity remains constant or increases, you are doing fine, however if there is a decrease, you should look into why, how and where the decrease came from.
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