Sales cycles and pipeline velocity are two important concepts used in the sales profession but are often confused. Understanding the difference between the two can be helpful for salespeople and sales leaders in pipeline management.
In this article, we discuss each element and consider their differences and what they mean for sales professionals.
Sales Cycle vs Pipeline Velocity – what’s the difference and impact?
Sales cycles refer to the stages a sales opportunity goes through, from the initial prospecting stage to the final closing stage. These stages can vary depending on the specific sales process. Typical stages include prospecting, qualification, proposal, negotiation, and closing. The sales cycle length can vary depending on the complexity of the sale and the customer’s needs.
But pipeline velocity is the speed at which opportunities move through each sales stage. In other words, velocity is the number of days it takes for an opportunity to move from one stage to the next.
By identifying bottlenecks in our sales process, we can understand what needs to change to speed up sales performance.
How Sales Cycle and Pipeline Velocity Affect Revenue
Let’s look at an example of how a higher velocity can reduce your sales cycle:
Say your entire sales cycle is 60 days from prospect to close. You generate 100 leads per month that go through four stages. So, at stage 1, you have 100 leads, and it takes 28 days, on average, to move to stage 2. So, your entire sales cycle is limited by how long it takes to move from stage 1 to stage 2.
▶ Remember, if your overall sales cycle is 60 days, you spend almost half of those days moving from stage 1 to stage 2.
Some ways to improve your velocity would be streamlining the process. You can do this by:
- Automating lead scoring
- Having a more effective follow-up process
After modifying your process, there are efficiency gains, so the velocity between stages 1 and 2 reduces to 13 days. Now, your sales cycle is 45 days instead of 60.
So, what does a shorter sales cycle mean for revenue? It means you sell faster.
Using our example, we can look at sales performance over six months, i.e., 180 days. For deal sizes of £100,000, you’d usually close three, totalling £300,000. That’s with a 60-day sales cycle.
An improved sales cycle of 45 days allows you to close leads worth £400,000 in the same period – 33% growth!
Factors Impacting Sales Pipeline Velocity
Several factors can impact the velocity of a sales pipeline. One crucial factor is the efficiency of the sales process itself. A cumbersome process can slow things down, so keeping each stage streamlined enables a faster-moving process.
Another factor that can impact pipeline velocity is the skillset of the sales team. For instance, a highly competent sales team has the know-how to identify and engage with decision-makers. Using the right channel to engage with a potential buyer could increase the likelihood of closing deals faster. A less effective team may struggle to maintain a high-velocity level.
Also, external factors can impact the velocity of a sales pipeline. Changes to the competitive landscape, e.g. new entrants, can affect the speed at which opportunities are moving through the pipeline. Prospects might have more options and more objections. There could be changes in customer needs or preferences that impact pipeline velocity.
At Doqaru, we help sales teams identify key competencies that affect sales cycle and pipeline velocity. Some of the competencies we measure with our data-driven tool are:
If you have low competency for qualifying or closing, these will increase the length of your overall sales cycle. Even slight improvements in qualifying leads help teams avoid wasting time on deals that were never going to close. Such leads end up prolonging your sales cycle.
What are the implications for salespeople and sales managers?
Maintaining an effective sales process drives successful, more predictive sales performance. Part of sales success comes from understanding the difference between sales cycles and pipeline velocity. Salespeople can then properly manage leads and move them through the pipeline. This can be particularly important for salespeople working on longer or more complex sales cycles. Without clear guidance on progressing opportunities from stage to stage, they can lose momentum, and lose the deal.
For sales managers, understanding pipeline velocity can help to identify any bottlenecks in the sales process that slows progress. Getting a handle on the process, tracking and measuring it, allows sales managers to know what good looks like. It becomes clearer when there are problems, e.g., the sales cycle is longer than expected. Therefore, sales managers can create more accurate sales forecasts and make more informed decisions.
To find out more about how to improve your pipeline velocity and sales cycle, contact, Sarah Downs, Co-Founder & CRO at Doqaru.