Lead Velocity: What It Is and Why It's Important

Finding a grounding path to success is crucial during times of volatility and uncertainty in the global business market or even just your specific industry. While some businesses will rely solely on industry-standard revenue-based metrics, the smart marketing team is shifting its focus to sales metrics for the winning solution. By closely monitoring month-over-month data points, you can take actionable steps immediately to ensure a favorable revenue growth trajectory throughout the foreseeable future. One of the best sales-based metrics available for maintaining the growth and stability of your business is by calculating your current pipeline’s Lead Velocity Rate (LVR). Unlike revenue-driven metrics, lead velocity (LV) is dependent on the current health of your qualified lead generation efforts. More to the point, lead velocity is one of the most dependable metrics you can use to gauge and maintain future growth goals, even during highly volatile times.

This article will teach you everything you need to know about LVR how to calculate it, why it’s important, and how to use the metric to ensure growth throughout the year.

What is Lead Velocity Rate (LVR)

Lead Velocity Rate measures the real-time month-over-month growth of qualified leads coming into your pipeline. Not to be confused with sales velocity rate, which measures how quickly sales move through your pipeline, LV focuses solely on current qualified lead growth. What sets LVR apart from other metrics is that you can accurately gauge in real-time how strong your current pipeline is and how much revenue can be generated from those qualified leads.

HOW TO CALCULATE LVR

Lead Velocity = The number of qualified leads last month - the number of qualified leads this month / Divided by the number of qualified leads last month. Multiply by 100 to get the percentage.

Why Calculating Lead Velocity (LV) is Important

Lead velocity uses real-time data unaffected by fluctuations often found in revenue-related metrics. As a result, you can constantly keep your finger on the pulse of your qualified pipeline and future sales revenue potential. When your LV number drops below the prior month’s, you can take immediate steps to rectify the deficiency, whether that be through working hard the following month to generate more qualified leads or further drilling down to find the source of the issue. By setting a targeted LVR percentage, you can use that number to accurately predict future revenue 12-18 months out as long as the LVR is maintained or exceeded each month.

Accuracy and consistency are critical when calculating LV

Decide ahead of time the criteria leads need to meet to be considered qualified. Does your business model consider leads to be qualified at the general interest stage? Or is it safer to make projections using sales-qualified leads that a salesperson has vetted?

Marketing Qualified Leads (MQLs), or leads that have shown an interest in your product or service but are still in the early stages of information gathering.

Sales Qualified Leads (SQLs), leads that have been vetted and moved past the general interest phase to being actively pursued by a salesperson?

How to use Lead Velocity to grow your business

A real-world example of how to use Lead Velocity to grow your business is illustrated in the Book “The Predictable Revenue Guide to Tripling Your Sales:”

So if you created $1 million in new qualified pipeline this month, and created $1.1 million in new qualified pipeline the following month, you are growing LVR at 10% month over month. So, your sales should grow 10% as well after a period of an average sales cycle length.

Once EchoSign hit $1 million in revenue run rate, we set an LVR growth target of 10% per month. Once we hit about $3 million in run rate, we dropped it to 8% growth per month. The goal of 8% per month was to produce enough leads to grow the business at least 100% year over year.

We hit the lead generation growth goals -- the LVR goals -- just about every month, and certainly every quarter, and every year. And by hook or crook, enhanced with an ever-improving sales team and an ever-improving product, the revenue growth followed.

The growth wasn't like clockwork each and every single day. But it emerged clearly over time -- every quarter, every year. And one great thing about LVR is while sales can vary a lot by month and quarter, there’s no reason leads can’t grow every single month like clockwork. Every. Single. Month.

BENEFITS OF TRACKING LVR

Keeps the focus on your current business health and month-over-month growth as opposed to annual growth goals
Provides a clear, accurate picture of qualified lead growth
With zero lag in the data, pipeline strength and future sales potential can be accurately measured
Immediately raises a red flag if the number of qualified leads drops month-over-month so necessary steps can be taken to get back on track as soon as possible
Shines a spotlight on the lead-generating channels providing the best return on investment (ROI)
Helps create an attainable growth strategy independent of season shifts, sales team turnover, and volatile market conditions

4 Ways to Improve LVR

1. Optimize your lead generation process

2. Create focused social media ads

3. Maintain a solid inside sales approach

4. Nurture your current customers and leads to gain referrals

Lead Velocity + Conversion Win Rate = Winning Combination

Having a real-time growth indicator is a huge advantage for your sales team and business. For example, if the number of qualified leads is falling behind from last month, you can immediately take action to fill the pipeline full of new, qualified leads. That all said, using a second revenue-driven metric like qualified lead conversion rate in conjunction with LVR will paint the whole picture of month-over-month growth potential and better predict future conversion rates along with quarterly and annual revenue.