By Brian Hansford, VP of Client Services for Heinz Marketing
B2B marketers are more accountable for sourcing or influencing revenue than ever. Measuring the influence is a significant hurdle because it often requires new tools and changes in data management and process. Measuring MQLs and activity metrics is not the answer because they don’t clearly show impact to revenue. Every week marketers ask me for a good starting point to measure pipeline health and revenue performance. There are several KPIs that measure B2B marketing revenue performance. If I had to choose just one KPI for marketers and the 12 Days of Christmas, I recommend measuring Sales Pipeline Velocity.
Sales pipeline velocity is a robust KPI which any B2B organization should be able to calculate. One of the reasons I like pipeline velocity is because it uses for critical attributes in the formula. Each attribute in themselves is important and any positive or negative change has an impact on overall pipeline velocity.
Here are the four attributes to measure sales pipeline velocity:
- Number of Active Opportunities (by month or quarter)
- Average Deal Value (by month or quarter)
- Average Sales Win % Rate (by month or quarter)
- Length of the Sales Cycle
Sales pipeline Velocity is calculated with this formula:
Pipeline Velocity = Number of Active Opportunities x Average Deal Value x % Deal Win Rate
Length of Sales Cycle
It’s very important you use the same time periods to measure pipeline velocity (months to months and quarters to quarters). Don’t use a quarterly win rate % and monthly active opportunities.
The next step is to compare Pipeline Velocity to Monthly Sales. Pipeline velocity is a leading indicator of overall sales performance. As pipeline velocity increases, so to should sales.
Here is why sales pipeline velocity is the best KPI you can start using in the new year:
- Pipeline velocity uses 4 critical attributes that each individually play a critical role in overall revenue performance.
- Pipeline velocity uses the average time for deals to close. Shrinking a sales cycle from 45 to 30 days, for example, could have a significant material impact on overall sales.
- The formula uses average deal size. Are deals increasing or decreasing in size?
- The formula also uses the number of active monthly opportunities. Are opportunities tracked consistently by sales reps? Are opportunities increasing or decreasing each month or quarter?
- Pipeline velocity can compare month to month, quarter to quarter, or annual performance.
- Improving the performance on just one of the numbers can have a significant impact. For example, increasing the number of opportunities or the average deal size. An increase or decrease in any number provides a strong historical diagnostic tool as well as an indicator of future performance!
What is your organization’s pipeline velocity performance over the last 12 to 18 months? What is your favorite B2B KPI for revenue performance?
Check back tomorrow for Day 6 of 12 Days of B2B Marketing: Marketing Technology