Sales Velocity: Your Key Metric for Sustainable Business Growth

Is your business truly growing, or are you just riding the wave of a favorable market?

In today’s competitive market, understanding your business’s growth potential is crucial.

Sales Velocity, a term coined by Reagan Consulting, stands out as a key metric to ensure you’re not just relying on favorable market conditions but are building sustainable growth.

Understanding your Sales Velocity allows you to gauge the effectiveness of your sales strategies, enabling you to make data-driven decisions to sustain growth even during market downturns.

Calculating your sales velocity

Sales Velocity measures the extent to which new business activity contributes to your growth, using a straightforward yet powerful formula:

 

 

 

 

Example

2024 Written New Business Revenue :$200,000

2023 Total Revenue (Fees and Commissions): $2,000,000

Calculation

 

 

 

A Sales Velocity of 10% indicates that for every $1 million in prior-year revenue, $100,000 is being generated through new business.

By consistently monitoring Sales Velocity, brokers can assess how much of their growth is driven by new business and identify areas for improvement.

This formula provides key insights into the contribution of new business to your overall growth.

 

Let’s look at a few examples

Example 1: High Sales Velocity (15%): “In 2023, ABC Insurance generated $300,000 in new business from a previous year’s revenue of $2,000,000. This high Sales Velocity indicates that ABC Insurance has a strong new business acquisition strategy, which positions them well for future growth.

ABC Insurance could maintain their strong position by reinforcing their client retention strategies to complement new business acquisition.

Example 2: Medium Sales Velocity (10%) Acme Broker generated $200,00 in new business against $2,000,000 in prior – year revenue, resulting in a 10% Sales Velocity. This indicates this firm could be vulnerable during market shifts.

Acme Broker should assess their new business pipeline, focusing on diversifying lead sources and enhancing sales efficiency to better weather potential market shifts.

Example 3: Low Sales Velocity (7%) In contrast, XYZ Brokers had $140,000 in new business against $2,000,000 in prior-year revenue, resulting in a 7% Sales Velocity. This signals a need for urgent action to boost new client acquisition.

XYZ Brokers should urgently focus on revamping their client acquisition efforts by revisiting their marketing and sales processes.

Your Sales Velocity Score

 

 

 

 

 

 

 

 

 

 

 

 

calculating results:

In column 1, list your current new business revenue results.

In column 2, list your prior year’s total revenue (fees and commissions).

Divide column 1 by column 2 to calculate your Sales Velocity.

If your 2024 new business revenue is $250,000 and your 2023 total revenue was $2,000,000, your Sales Velocity score would be calculated as $250,000 ÷ $2,000,000 = 12.5%

What Does This Mean?

 

 

 

 

 

 

 

 

 

 

 

 

12%+ Healthy: A score in this range indicates that your current strategies are strong, but continued monitoring and market exploration are crucial to maintain and enhance growth. Regular reviews of your sales tactics and client engagement strategies are recommended.

Although this score indicates strength, brokers should continue to fine-tune their strategies and explore new markets to sustain this growth.

10-12% Vulnerable: You’re in a potentially risky zone. In this range, brokers should consider refining their client acquisition and retention strategies to improve new business flow.

Brokers in this range should also consider increasing the frequency of lead-generation activities to build a stronger pipeline of new business.

<9% Urgent: This low score is a red flag. Consider implementing targeted marketing campaigns, increasing touchpoints with prospective clients, and refining your value proposition to address the unique needs of your market.

Firms in this range should consider revisiting their entire sales process, possibly seeking outside consultation or support to turn things around.

Conclusion

Calculating your Sales Velocity at least annually helps to track trends, set growth targets, and adjust strategies as needed.

Take control of your business today by regularly monitoring and improving your Sales Velocity, you can stay ahead in an increasingly competitive landscape.

Apply these strategies today to ensure your business not only survives but thrives in any market condition.