What Does Velocity Mean in Business

Sorry, I do not understand your question. If you can say more about what you are trying to accomplish, I will try to help you. Companies need to consider a balance between the cost of acquiring new customers and profits. For this model to work, it is necessary to generate enough revenue from customers that outweigh the cost of their acquisition. If this is not the case, profits will suffer, as these expenses cannot be fully covered by the sale alone. Empirically, the data suggest that the velocity of money circulation is indeed variable. In addition, the relationship between the velocity of money and inflation is also variable. For example, from 1959 to the end of 2007, the velocity of M2 money supply averaged about 1.9x, with a maximum of 2.198x in 1997 and a low of 1.653x in 1964. To increase the average size of your business, it`s about tying value to customers precisely with a price they`re willing and able to spend.

Let`s apply this equation with an example of a company called Fake Company 500. Each business works best in different ways, but standardized tips for increasing business speed as follows: The velocity of money circulation appeared to have bottomed out at 1,435 in the second quarter of 2017 and gradually increased until the global recession triggered by the COVID-19 pandemic triggered massive stimulus measures from the U.S. federal government. At the end of the second quarter of 2020, M2V was at 1,100, the lowest value of the M2 monetary velocity in history. I have a way to get back into Market ACV, but it takes $per million to calculate it, so it doesn`t help if you don`t have $per million at all! FYI, here is the article on supporting the calculation of the annual market value at $ and $ per million. Velocity tells you how well your product sells when it`s available to consumers on the shelf. When you combine speed and distribution, you get retail sales. For example, you can expect your sales team to generate a quota of $60,000 this month, but they don`t have the loyalty and customer support resources to sustain that revenue over the long term. Maybe your team`s high speed comes from the value of large deals rather than a healthy number of leads, so if your pipeline shrinks even a bit, your team will fail quickly. Although calculating sales speed is quite simple, interpreting it can be a bit difficult. Here are some clear areas where sales speed can influence your strategic decisions: It`s important to note that opportunities aren`t leads. Prospects are consumers who have shown interest in your business or product, whether by clicking on an ad or signing up for a newsletter.

Opportunities are qualified leads. This means that a salesperson has analyzed the prospect and classified them as likely to be a customer based on certain criteria. Money velocity is a measure of the rate at which money is exchanged in an economy. It is the frequency with which money moves from one entity to another. Money velocity also refers to the amount of a monetary unit used during a given period. Simply put, it is the rate at which consumers and businesses collectively spend money in an economy. The results of the sales velocity equation reflect the state of the business, the overall effectiveness of the sales team, and the position where the team can increase sales productivity to positively impact revenue goals. Customizing your sales pitch is just one way to stand out from the competition.

Selling should be an extension of customer service, not a difficult sale that doesn`t meet their needs and concerns. Second, the longer the analysis, the better. Measure sales speed from at least one quarter and even six months to a year. This extended sampling period takes into account variables such as seasonality or unusually long activity. Do you also have rules of thumb as to what percentage of annual revenue (sales to distributors) should be spent on marketing (promos + demos) to reach full speed? We aim to maintain margins of approximately 40% on sales to distributors before promotions and IOs. A prospect is a potential customer who has expressed interest in your business by interacting with it in some way (website, blogs, etc.). Prospects must be qualified as valid to be followed by salespeople. The equation for sales speed is actually quite simple.

Why does the SPPD not work when comparing markets? Because a distribution point in a large market brings more sales than in a small market. For example, sales in 75% of New York will generate much more revenue than 75% sales in Des Moines. If you look at the markets, not only the percentage of ACV may be different, but also the actual ACV. So you need a speed measurement that reflects the actual apple cider vinegar, not the percentage of apple cider vinegar. That`s what Sales per Million does. To calculate sales speed, multiply the number of leads, average sales value, and overall success rate, and then divide that number by the length of your average sales cycle. Although it differs by industry, location and business; Account managers are paid more than Customer Success Managers simply because they are salespeople and there are incentives to succeed. Visualizing speed as sales by distribution point (SPPD) is the simplest and most intuitive choice for analyzing sales within a single market or retailer. This measure, sometimes referred to as “sales per point,” is an improvement over sales per store because it takes into account store size by using a distribution measure weighted by ACV in the denominator.

Like all speed measurements, SPPD can be expressed in dollars, units, or volume per distribution point. This is a common challenge for companies in the scaling phase. They invest heavily in the front-end to generate business in the early stages, but pursue this strategy for so long that customer loyalty suffers. Before you focus on maintaining or increasing sales speed, take a look at your customer retention rate. How does it work? However, an additional problem that arises when measuring brand speed is that large domestic brands usually have more varieties (flavors, sizes, whatever) in distribution. They have a wider range, so more SKUs contribute to the overall sales of the brand. To account for this, you should look at speed measurements that take into account the number of elements. One way to do this is to simply divide the speed at the $/MM marker level by the number of items on the line (which basically corresponds to the average speed per item). Another way to do this is to use the total number of distribution points (TDP or TPD) as the denominator.

I wrote an article about it here.