Lead Velocity Rate (LVR) Explained: A Comprehensive How-To

Lead velocity rate (LVR) is a crucial metric that helps businesses gage their sales efficiency and growth potential. This powerful indicator measures the month-over-month growth in qualified leads, providing valuable insights into a company's sales pipeline and future revenue prospects.

By tracking LVR, organizations can make data-driven decisions to optimize their lead generation strategies and improve overall sales performance. In this comprehensive guide, we'll explore the ins and outs of lead velocity rate. We'll break down what LVR is, show you how to calculate it, and highlight its benefits for businesses.

You'll also learn best practices to boost your LVR and drive sustainable growth. Whether you're a sales manager, marketing professional, or business owner, understanding and leveraging LVR can give you a competitive edge in today's fast-paced market.

What is Lead Velocity Rate (LVR)?

Definition of LVR

Lead velocity rate (LVR) is a dynamic sales metric that measures the month-over-month growth in qualified leads. It provides valuable insights into pipeline health, future revenue, and business growth. LVR goes beyond simply counting new leads; it reveals the rate at which a business attracts potential customers. This metric is calculated by comparing the number of qualified leads in the current month to the previous month, expressed as a percentage.

Importance in SaaS and B2B

In the SaaS and B2B sectors, lead velocity rate has a crucial role in predicting future success. It is often considered a better gage of growth and future revenues compared to other metrics. LVR is particularly significant because:

1. It is a real-time indicator: Unlike lagging metrics, LVR provides immediate insights into lead generation performance.
2. It predicts future revenue: By tracking the growth of qualified leads, businesses can anticipate future sales and adjust strategies accordingly.
3. It enables proactive decision-making: Sales and marketing teams can make timely adjustments to their strategies based on LVR trends.
4. It aligns sales and marketing efforts: LVR helps both departments optimize lead generation to boost revenue growth.
5. It offers consistent insights: LVR reduces the influence of variables like seasonality and team performance by focusing on growth rates rather than raw numbers.

Difference from other metrics

Lead velocity rate stands out from other sales metrics in several ways:

1. Forward-looking vs. backward-looking: While metrics like Monthly Recurring Revenue (MRR) or Customer Acquisition Cost (CAC) reflect past performance, LVR provides a glimpse into future business potential.
2. Focus on growth rate: LVR measures the rate of change in qualified leads, not just the absolute number of leads generated.
3. Qualified leads only: LVR specifically considers qualified leads, making it a more reliable predictor of potential revenue compared to metrics that include all leads.
4. Distinct from sales velocity: While sales velocity measures how quickly deals move through the pipeline, LVR focuses on the growth of leads entering the pipeline.
5. Real-time nature: LVR offers immediate insights, allowing businesses to make quick adjustments to their strategies.

By understanding and leveraging lead velocity rate, businesses can gain a competitive edge in today's fast-paced market. It provides a clear picture of pipeline health and growth potential, enabling companies to make data-driven decisions and optimize their lead generation efforts for sustainable growth.

How to Calculate Lead Velocity Rate

LVR formula

The lead velocity rate (LVR) formula measures the month-over-month growth in qualified leads. To calculate LVR, use the following equation:

LVR = (Number of Qualified Leads in Current Month - Number of Qualified Leads in Previous Month) ÷ Number of Qualified Leads in Previous Month × 100

This formula provides a clear metric to understand the change in qualified leads over time, expressed as a percentage. It helps businesses gage their sales efficiency and growth potential.

Step-by-step calculation

To calculate the lead velocity rate, follow these steps:

1. Determine the number of qualified leads generated in the current month.
2. Identify the number of qualified leads generated in the previous month.
3. Subtract the number of leads from the previous month from the current month.
4. Divide the result by the number of leads from the previous month.
5. Multiply by 100 to convert the result to a percentage.

This step-by-step process allows businesses to track their lead generation growth consistently and make data-driven decisions to improve their sales efficiency.

Example calculation

Let's walk through an example to illustrate how to calculate lead velocity rate:

Suppose a company generated 120 qualified leads in June and 100 qualified leads in May. To find the LVR:

1. Subtract May leads from June leads: 120 - 100 = 20
2. Divide the difference by May leads: 20 ÷ 100 = 0.2
3. Convert the result to a percentage: 0.2 × 100 = 20%

In this case, the lead velocity rate is 20%, indicating a 20% increase in qualified leads from May to June.

Another example using dollar values instead of lead numbers:

If a company created USD 1.00 million in new qualified pipeline one month and USD 1.10 million the following month, the LVR growth would be 10% month-over-month. This suggests that sales should grow by approximately 10% after an average sales cycle length.

It's important to note that while sales can vary significantly by month and quarter, lead velocity rate can grow consistently every month. This makes LVR a reliable indicator of future revenue growth and a valuable metric for predicting business performance.

Some companies set specific LVR growth targets to drive their business forward. For instance, a SaaS company might aim for a 10% monthly LVR growth when they reach USD 1.00 million in revenue run rate, and then adjust it to 8% per month as they hit USD 3.00 million in run rate. These targets can help businesses maintain steady growth and achieve their long-term revenue goals.

By consistently tracking and analyzing lead velocity rate, companies can gain valuable insights into their sales pipeline health, make timely adjustments to their lead generation strategies, and ultimately improve their overall sales performance. This real-time metric enables businesses to stay agile and responsive in today's competitive market landscape.

Benefits of Tracking Lead Velocity Rate

Real-time growth indicator

Lead velocity rate (LVR) serves as a powerful real-time indicator of a company's growth potential. Unlike lagging metrics such as Monthly Recurring Revenue (MRR), LVR provides immediate insights into lead generation performance. This allows businesses to make timely adjustments to their strategies based on current trends.

By consistently monitoring LVR, companies can establish realistic targets and track their progress in real-time. The real-time nature of LVR makes it an invaluable tool for businesses seeking to stay agile in today's fast-paced market.

If a company notices a sharp drop in qualified leads, it can quickly identify potential issues in its lead generation processes and take corrective action. This early warning system enables businesses to address problems before they have a significant impact on revenue.

Future revenue predictor

One of the most significant benefits of tracking lead velocity rate is its ability to predict future revenue growth. LVR has a strong correlation with future conversion rates, making it a reliable forecasting tool. A positive lead velocity usually translates to higher closure rates, giving businesses a clear picture of their future revenue potential.

By combining LVR with other key metrics such as marketing-qualified leads (MQL), sales-qualified leads (SQL), and the SQL-to-win ratio, companies can gain a more comprehensive view of their future revenue potential. This enables better short-term and long-term revenue forecasting, allowing businesses to make informed decisions regarding budgeting, resource allocation, and growth strategies.

For startups and established companies alike, demonstrating a robust LVR can significantly boost investor confidence. Investors seek businesses with predictable and scalable revenue streams, and a strong LVR provides transparent and data-driven revenue projections that can attract more investment opportunities.

Sales and marketing alignment

Lead velocity rate has a crucial role in aligning sales and marketing efforts. By focusing on the growth of qualified leads, LVR encourages both departments to work together towards a common goal. This alignment is essential for optimizing lead generation and boosting revenue growth.

LVR helps businesses determine the effectiveness of their marketing campaigns by identifying which initiatives contribute the most to lead growth. This information allows marketing teams to refine their strategies and focus on the most productive channels for generating qualified leads.

For sales teams, LVR provides valuable insights into pipeline health and future workload. By tracking the growth in qualified leads, sales representatives can better prepare for upcoming opportunities and allocate resources more effectively.

Moreover, monitoring LVR promotes accountability within teams. When both sales and marketing have visibility into real-time performance metrics, they become more focused on lead acquisition goals and efforts. This shared responsibility fosters better collaboration and communication between the two departments, ultimately leading to improved overall performance.

In conclusion, tracking lead velocity rate offers numerous benefits for businesses seeking to optimize their sales efficiency and drive growth. As a real-time growth indicator, future revenue predictor, and tool for sales and marketing alignment, LVR provides valuable insights that can help companies make data-driven decisions and stay competitive in today's dynamic business landscape.

Best Practices for Improving LVR

Defining qualified leads

To improve lead velocity rate (LVR), it's crucial to start by clearly defining what constitutes a qualified lead. A qualified lead is not just any potential customer but a prospect who has shown genuine interest in a company's products or services and has a higher probability of becoming a customer. These leads typically meet specific criteria that align with the ideal customer profile.

There are different types of qualified leads:

• Product Qualified Leads (PQLs): These are identified through product-centric activities such as feature adoption or frequency of app usage.
• Marketing Qualified Leads (MQLs): Prospects who have engaged with marketing campaigns and shown a higher likelihood of becoming customers.
• Sales Qualified Leads (SQLs): Leads that meet specific criteria outlined by the sales team, such as clear demand for the product, financial capacity, and a defined timeframe for purchasing.

By focusing on these qualified leads, businesses can ensure that their LVR calculations are based on high-quality prospects, making the metric a more reliable predictor of future revenue growth.

Setting LVR goals

Setting realistic and achievable LVR goals is essential for driving growth and maintaining momentum. To establish appropriate targets:

1. Start with the Monthly Recurring Revenue (MRR) growth rate target and calculate the number of qualified leads needed to achieve that revenue.
2. Consider industry benchmarks and company-specific factors such as seasonality, product type, and target market.
3. Adjust goals based on historical performance and current market conditions.

For example, some SaaS companies set specific LVR growth targets as they reach certain revenue milestones. One approach is to aim for a 10% monthly LVR growth when reaching $1 million in revenue run rate, then adjusting to 8% per month at $3 million in run rate.

Strategies to increase LVR

To boost lead velocity rate and drive sales efficiency, consider implementing these strategies:

1. Optimize lead generation: Leverage a mix of channels, including email marketing, content marketing, social media, and paid advertising, to create diverse touchpoints with potential leads.
2. Refine lead qualification criteria: Regularly review and adjust qualification criteria to ensure they match good-fit leads and are consistently applied across all customer touchpoints.
3. Implement lead nurturing: Develop segmented email campaigns based on lead characteristics, behaviors, and interests to keep prospects engaged and move them through the sales funnel.
4. Utilize sales CRM and marketing automation tools: Integrate these tools to enhance lead scoring and qualification processes, ensuring the sales team focuses on the most promising leads.
5. Analyze and optimize: Continuously monitor LVR and other related metrics to identify areas for improvement and adjust strategies accordingly.
6. Address objections proactively: Anticipate and address common concerns or objections before they arise to help close deals faster and improve overall conversion rates.
7. Foster sales and marketing alignment: Encourage collaboration between teams to ensure a seamless lead handoff process and consistent messaging throughout the customer journey.

By implementing these best practices, businesses can improve their lead velocity rate, leading to more predictable revenue growth and enhanced sales performance. Remember that LVR is just one piece of the puzzle, and it should be used in conjunction with other key performance indicators for a comprehensive view of business health and growth potential.

FAQs

1. What does Lead Velocity Rate (LVR) signify?

‍Lead Velocity Rate (LVR) is a metric that quantifies the growth in qualified leads over a month, compared to a prior reference month. It is a significant indicator of a company's future revenue and growth prospects when tracked from month to month.

2. How is the Lead Velocity Rate used in Salesforce?

‍In Salesforce, the Lead Velocity Rate is utilized as a dynamic sales metric that tracks the month-to-month growth in leads. It provides crucial insights into the health of the sales pipeline, potential future revenue, and overall business growth. LVR helps in understanding the rate at which a business is attracting potential customers, beyond just the count of new leads.

3. What is the definition of Lead Velocity Rate according to HubSpot?

‍HubSpot defines the Lead Velocity Rate as the month-over-month growth of qualified leads, emphasizing its role as a real-time growth metric. HubSpot distinguishes Lead Velocity from Sales Velocity, which measures the speed at which deals progress through the sales pipeline and generate revenue.

4. What is MQL Velocity and why is it important?

‍Marketing Qualified Leads (MQL) Velocity refers to the rate at which new contacts become MQLs within a specified timeframe. It is crucial not only to track the number of MQLs being generated but also to understand the velocity with which these potential leads are qualified, impacting marketing and sales strategies.