“Every company will handle this differently but at least it’s important to recognize the value. ” – John Di Marzio in today’s Tip 909
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Transcript
Scott Ingram: You’re listening to the Daily Sales Tips podcast and I’m your host, Scott Ingram. Today’s tip comes from John Di Marzio. John is the founder and CEO of DIMARTECH, a steel fabrication company based out of Montreal, Canada. He is a member of three (3) Professional Engineering Associations and the Canadian Professional Sales Association. Here he is:
John Di Marzio: In physics, velocity or speed is the measurement of the distance traveled over a set period of time. Whether you’re driving your car or running laps, the distance you cover over time while calculate your speed. This can also apply to your sales team.
A pretty handy tool to measure your sales process would be to calculate your sales velocity, which is essentially is the amount of revenue you generate over a period of time.
The equation is pretty straightforward, but it’s got 4 variables that contribute to the calculation:
- Number of opportunities
- $ average deal size
- % win rate
- Length of the sale cycle
SV = no. of opps X average deal value ($) X win rate (%) / sales cycle
So simply put, you want to increase the first three variables and you’ll want to reduce the fourth. Now we’re going to use a generic 10% modification number here for the calculations and for the study.
Since the Sales Velocity equation uses only four variables, you can quickly assess which of the four actually makes a difference. Use that to redefine sales targets and hone in on opportunities that create the highest yield.
- Supposing you increase the Number of opportunities by 10%. This is all about effort. That will likely increase the number of deals you can win by 10% and within the same time frame, your sales velocity will increase by 10%. This variable takes a lot of time and effort.
- Supposing you combine that with Increasing the average deal size by 10%, then you elan more on focusing on higher-value opportunities, you can sell more in the same time period which adds exponentially for a total of 21%. Studying your client’s buying process, find out if there are other types of deals you aren’t aware of, maybe new markets for your products.
- Increase your win rate by 10% more? Well, now you’ve added a third variable to the equation. This part is a little more complex and will rely heavily on your individual sales process. Every company will handle this differently but at least it’s important to recognize the value. Add this in are you are now at 33% higher sales velocity.
- The part is the denominator and you will look to reduce it: Time. The sales cycle. Logging in more revenue within the same time frame will have the same effect as the same revenue in a shorter time frame. You can be short on the first three variables and do it quick enough to reduce the time frame, and you can still come out a winner. Oh by the way, if you can reduce your time frame by 10%, you will essentially have an overall sales velocity increase of 48%. Use your time wisely and don’t waste it on subpar opportunities.
Go back and listen to this recording a second time and write down the formula.
SV = no. of opps X average deal value ($) X win rate (%) / sales cycle
Give it a try, and you may be surprised at what you discover.
Scott Ingram: For a transcript of today’s tip, along with links to connect with John and get a copy of his book, just click over to DailySales.Tips/909.
Once you’ve done that. Be sure to come back tomorrow for another great sales tip. Thanks for listening!