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Dec 07, 2023 A88Lab.

Understanding Pipeline Velocity for B2B SaaS

Pipeline velocity, sometimes referred to as sales pipeline velocity, is one of the most important metrics for SaaS companies. It calculates your benchmark growth, i.e., your overall marketing performance, and gives you a great overview of where your prospects get stuck during their sales journey. 

Why is this important? Well, the more time it takes for a lead to close a deal with you, the more resources you spend trying to convince them, and the higher your chances of losing them to a competitor are. 

In B2B SaaS, where customer acquisition costs can get pretty high, you have to understand pipeline velocity if you want to optimize your sales processes and increase revenue. 

By pinpointing bottlenecks in your sales process, you can fine-tune your SaaS sales and marketing strategies to cut costs and close deals faster. Plus, having a grasp on pipeline velocity allows you to plan for future growth, making it an essential metric for business scalability.

What Is Pipeline Velocity?

If you had to pick just one number to see how much your business is growing, pipeline velocity is the way to go. It gives you a big-picture view of every aspect of your business.

As we mentioned before, pipeline velocity is a metric that measures how fast leads move through your sales pipeline. It's a KPI that helps businesses of all sizes figure out how well their sales process works. 

A high pipeline velocity means your company sells its products quickly and efficiently, which leads to increased revenue and profits. A low sales velocity indicates you may be struggling to sell, which leads to decreased revenue and profits.

Tracking this is crucial for your sales team as it helps your management spot any problems in the sales journey early on and take the steps they need to make things more efficient. This helps them predict the revenue more accurately and ensure their sales reps use their time wisely. 

Quote from Dan Tyre, HubSpot Director of sales

Pipeline velocity isn't just for sales, though. It's a metric that marketing teams can use to determine their contribution to the sales process and see how well their lead-generation efforts work. 

By looking at how fast leads move through different sales stages, marketers can figure out which lead sources are the best and tweak their strategies accordingly. When doing this, you also have to keep in mind that lead quality is more important than lead volume. Having lots of opportunities in the pipeline may look great, but without a strong conversion rate, the overall results will fall short. 

When it comes to the B2B SaaS, pipeline velocity is all about how quickly your team can turn a sales opportunity into a closed-won deal. The SaaS velocity formula will help you calculate how much revenue the sales team can generate in a specific sales cycle. It takes into account things like the number of sales opportunities, deal value, win rate, and how long the sales cycle takes.

Pipeline Velocity Formula for B2B SaaS

Factors Influencing Pipeline Velocity

Even though it's important, measuring your pipeline velocity can be a boring chore unless you look at the right factors that will help you make the best business decisions.

Let's take a look at four factors that influence pipeline velocity the most: 

Lead Quality

Probably the most critical factor that can affect the value of your pipeline velocity is lead quality. Lead quality can tell you whether or not a lead might have the potential to become a paying customer and how likely they are to make a purchase.

97% of your leads are not active buyers. If you don’t take the right approach, you’ll easily divert your attention away from those 3% of leads who are eager and ready to buy and focus on poor-quality leads. And wasting the time of your sales or marketing team working with these leads will only slow down your whole sales cycle process.

To make sure you are generating the right leads, here are a few tactics you should keep in mind:

Collect Intent Data to See Which Leads Are Ready to Buy

Using intent data can be a game-changer for optimizing pipeline velocity. Intent data gives you valuable insights into the online behavior of potential leads, helping you identify those who are actively researching and showing a readiness to make a purchase. This approach ensures that valuable resources are directed towards prospects with a higher likelihood of conversion, speeding up the whole sales cycle.

Implement Lead Tracking to Find More Qualified Leads [And Close Deals]

Lead tracking is all about figuring out where your leads come from, keeping an eye on how they're moving through the sales and marketing funnel, and taking the right steps to move them closer to making a purchase. By tracking leads, you can see which channels and content are generating the most of them and which ones are resulting in the highest quality. 

Acquire New Leads That Fit Your Ideal Customer Profile

Acquiring leads that fit your ICP helps you to attract high-quality leads that are more likely to convert into paying customers. By focusing on the right leads, you can speed up the journey from lead to closed deal, which ultimately impacts your pipeline velocity.

Sales Cycle Length

The sales cycle length is the amount of time that passes between the first touch with a potential customer and the deal's closing. Understanding the sales cycle length, you create sales projections based on the leads in your pipeline. This means you can predict future revenue, which is key to forming a business strategy.

If your sales cycle takes too long, it can slow down the movement of deals through the pipeline, resulting in lower pipeline velocity. But don't worry; you can fix this by analyzing your sales cycle and identifying the stages that are causing delays so you can take appropriate measures to reduce the cycle time and increase pipeline velocity. 

However, if your sales cycle is too short, it can result in higher pipeline velocity, but it may also lead to lower-quality deals and a higher churn rate. That's not good, either. So, make sure you focus on improving the quality of leads you generate and ensure your sales team is well-trained to handle leads effectively.

Factors influencing pipeline velocity

Deal Value

The third factor that impacts the pipeline velocity is the deal value. Deal value refers to a product or service's perceived quality and benefit rather than just the price. It focuses on what both the sales rep and the customer get out of the deal, emphasizing the product's ability to solve the customer's problems and meet their needs.

Deals with a higher value tend to take longer to close, considering they require more complex negotiations, involve multiple stakeholders, and more time to finalize. This slows down the movement of deals through the pipeline, resulting in a lower pipeline velocity. 

On the other side, deals with a lower value close more quickly, resulting in a higher pipeline velocity. Then again, focusing solely on low-value deals can lead to a higher churn rate and lower revenue in the long run. Therefore, it's important to strike a balance between high-value and low-value deals to ensure that the pipeline velocity is optimized while also maintaining a healthy revenue stream. 

Win Rate

The win rate represents the percentage of deals won out of the total number of deals pursued. It's an important metric that helps businesses analyze the effectiveness of their sales process and identify areas for improvement. 

A higher win rate indicates that the sales team is closing deals more efficiently, which can lead to a faster movement of deals through the pipeline, resulting in a higher overall velocity. 

A lower win rate suggests that the sales team is struggling to close deals. This can be caused by various factors, such as poor lead generation, an ineffective sales process, or a lack of alignment between the sales and marketing teams.

To increase win rates and improve pipeline velocity, you can focus on improving lead quality, offering better training and resources to your sales team, and streamlining the sales process. By doing so, you can enhance their sales operations, improve your win rate, and increase the overall velocity of deals through the pipeline.

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Strategies to Accelerate Pipeline Velocity

Accelerating your pipeline velocity brings all sorts of great benefits. It helps you grow your revenue faster, make your sales team more productive, save you money, and improve the overall experience for your customers. By making pipeline acceleration a priority, you will achieve sustainable growth, increased productivity, and happy customers.

Here are a few strategies that can help you with it:

1. Enhancing Lead Quality Through Ungated High-Value Content

To improve your pipeline velocity, first, you need to improve the quality of leads you generate, as it affects every aspect of your pipeline velocity. The best way to enhance the quality of your leads is to produce high-quality ungated content.

Unfortunately, it's become common for SaaS companies to gate an average-quality piece of content, forcing users to fill out forms just to access the material. This approach doesn't benefit the people reading the content; it only benefits the business. So, the question is: who is the content really for, the audience or the sales motion?

We know it's tempting to want to produce gated content to generate more leads, but it's time to rethink this approach. Ungating content may decrease your lead volume, but it will increase your lead quality.

As leads continue to take more control of the sales process, allowing them to conduct their own research, you create a better buying experience for them. Therefore, by the time your leads reach the decision stage, they should have gathered enough information to make an informed purchase decision on their own.

2. Introducing Guided Demos to Reduce Sales Cycle Length

Producing guided demos is a fantastic way of speeding up your sales cycle and boosting the pipeline velocity. By offering guided demos, you're giving your prospects a hands-on experience with your product or service, which helps them understand the value your business can bring to them. 

This interactive approach is not only fast and efficient but also allows your sales team to address specific needs and concerns in real time. With guided demos, your potential customers can explore the features that matter most to them, making the entire experience more personalized. 

A great example of a SaaS company that implements this approach is HubSpot, which offers a guided demo that focuses on helping users understand how their marketing software can help them generate more leads and close more deals.

By incorporating these demos into your sales process, you provide prospects with a more personalized and efficient experience, leading to increased pipeline velocity and ultimately contributing to the overall success of your B2B SaaS business.

3. Optimizing Pricing Strategies for Better Deal Values

Optimizing pricing strategies is a pivotal element in enhancing deal values and ultimately boosting pipeline velocity. Price optimization is a practice rooted in analyzing customer and market data. Its goal is to identify the optimal price point that attracts customers, maximizes sales, and increases profits. 

To optimize your SaaS pricing strategy, you need to understand your target audience. This means identifying your best customers, understanding their preferences and needs, and determining what features they value most.

You also need to consider your competition and the unique needs of your market. Once you have this information, you can align your pricing with what your customers value, tracking the results of the price changes you make and improving over time.

4. Developing Strategy for 3rd Party Review Sites

Having a strong strategy for third-party review sites can accelerate pipeline velocity in several ways. Firstly, positive reviews from satisfied customers can help build trust and credibility, leading to increased brand recognition and customer loyalty.

Secondly, addressing negative reviews transparently shows a commitment to customer satisfaction, which can help mitigate any potential damage to your brand's reputation. This can help maintain a positive brand image and reduce potential roadblocks in the sales process. 

Finally, by actively monitoring and responding to reviews, you gain valuable insights into your customer's needs and preferences, which can inform and optimize your marketing and sales strategies to improve pipeline velocity. 

Overall, a well-executed strategy for third-party review sites can help accelerate pipeline velocity by fostering trust, promoting customer loyalty, and providing valuable insights into the customer experience.

5. Streamlining Sales Processes

Having a well-designed and optimized sales process is like having a finely-tuned engine that guides leads through each stage, from initial contact to a successful closed-won deal. By identifying and eliminating bottlenecks, redundancies, and unnecessary complexities, you can significantly reduce the time it takes for a lead to move through the pipeline. 

This not only enhances the overall customer experience but also ensures that valuable resources, including the time and effort of the sales team, are used efficiently. Incorporating automation tools, such as CRM systems and lead scoring mechanisms, can further speed up routine tasks, allowing sales reps to focus on high-value activities and strategic relationship-building. 

Key Performance Indicators (KPIs) Affecting the Pipeline Velocity

1. Average Deal Size

The average deal size is a crucial performance metric that businesses use to evaluate the performance of their sales team and predict future revenue. By figuring out the average deal size, your SaaS can get a quick view of how their products and services are doing in terms of sales, cost, and revenue growth. A higher average deal size indicates that the sales team is closing more significant deals, leading to higher revenue for the company. Consistently measuring the average deal size can help you identify areas of improvement in their sales process.

This metric also assists in setting revenue goals, predicting earnings, and deciding how to use their resources. In a nutshell, understanding the average deal size allows companies to make smart choices about their budget and grow their business.

Average Deal Size = Total Value of Closed Won Opportunities / Number of Total Closed Deals

2. Conversion Rates at Various Stages

Tracking your conversion rates at various stages is super helpful in showing how your sales process is doing and where things might be getting stuck. By looking at how many opportunities move from one stage to the next, you can see where your process, product, or sales reps might need some help. 

It's important to use process-based stages instead of things like forecast categories to make sure your measurements are accurate. Closing a deal is a process, and there are certain things that have to happen each time. You want to measure how opportunities move through your process, not how good reps are at guessing what they're going to win. Looking at the conversion rate between each stage can help you find the problem areas. 

For example, if a stage has a low conversion rate, like 30%, it's worth checking out that part of the process to see what's going on. If a stage has a really high conversion rate, like over 95%, you might be able to simplify the process and combine that step with the one before or after it. 

Conversion Rate = Number Of Lead Converted Into Sales/ Total Number Of Leads X 100

3. Length of the Sales Cycle

The sales cycle is the process that salespeople follow to turn a lead into a paying customer. A well-defined sales cycle helps salespeople understand where each lead is within the cycle, what actions they should take next, and how they can improve their success rate. It can also help them identify areas where they need to optimize their sales process, such as targeting the right audience, improving their messaging, or streamlining their onboarding process. 

Calculating the length of the SaaS sales cycle is crucial for any SaaS sales team. It helps them estimate how long it will take to close similar deals in the future and plan their resources accordingly.

To calculate your sales length cycle, add up how many days it took to close each sale and then divide by the total number of deals.  

By analyzing the SaaS sales pipeline, salespeople can identify the high-probability customers and forecast when the revenue from pending sales will hit. This forecasting can guide their business strategies, such as marketing campaigns, product development, and customer retention initiatives.

4. Lead Response Time

Lead Response Time is a metric that calculates the average time it takes for a sales rep to follow up with a lead after they've shown an interest in your product or service by filling out a form, downloading an ebook, or some other way. 

This metric becomes even more meaningful if you segment leads by their source. Why? Well, the warmer a lead is, the more important it is to follow up quickly. You don't want to miss out on potential customers who are already interested in what you have to offer. So, let's say someone has requested a demo of your software - that person is a warmer lead compared to someone who's just downloaded a whitepaper. By calculating the average follow-up time for leads based on their source, you'll be able to prioritize and focus on the leads that require immediate attention.

How to calculate Lead Response Time:

Step 1:

Time/Date Of New Contact - Time/Date Of Follow Up = (#) Of Min/Hrs/Days To Respond

Step 2:

Sum Of (#) Min/Hrs/Day To Respond For All Contacts / (#) Contacts = Avg (#) Of Min/Hrs/Days To Respond

Conclusion

When it comes to B2B SaaS, pipeline velocity can significantly impact a business's overall success. By leveraging third-party review sites, streamlining sales processes, and prioritizing customer trust and satisfaction, you can effectively accelerate your pipeline and drive revenue growth.

But this vital metric is not just a number on a spreadsheet; it's a crucial factor that can significantly impact a business's growth and overall efficiency. 

Pipeline velocity is a powerful guiding principle that helps businesses navigate the market, accelerate revenue, and provide exceptional value to their customers and stakeholders. By constantly optimizing it, businesses can reduce sales cycles, increase the predictability of their revenue, and ultimately achieve greater success.

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