Getting to a Start-up Sales Forecast that You Can Sleep On

Finding your sales velocity elevates you above the guessing game with sales forecast


Forecasting revenues for a young company is hard. However, many operating decisions involving hiring and other operating expenditure forecast require CEO/CMO/Sales VPs to understand how their sales machine is performing. You can build a solid sales forecast with an understanding of how sales velocity works. Don’t despair – it’s very doable and you can refine your assumptions over time, leading to better and more accurate forecasts as you grow.

Use Sales Velocity to augment Accounting revenues to help you understand where the ship is sailing 


Accounting revenue is a backward-looking metric by nature. Tracking and using sales velocity along with your accounting revenue will help you find the most significant factors that drive revenues.

Finding your sales velocity will also balance your expectations, which is very important to keeping you sane. We’ll get into below with an example.

Example time! We’ll use the theoretical company from our previous blog post on profiling the ideal customer profile for this part of the process.

Sales velocity is a concept that shows how much money you can make per unit of time (week, month, year), based on your current sales and marketing organization fundamentals.

Suppose you have a web-based product with a SaaS based revenue model, aimed at small to medium sized marketing agencies.

1. The number of accounts you can approach is 100 per month with your current sales team

2. The sales cycle is roughly 1 month

3. The average contract value is about $100 per month /$1200 per year

4. The win rate is about 5% (out of every 20 leads, one deal closes)

Calculate the current sales velocity

Sales velocity: (the number of opportunities x ACV x win rate ) / sales cycle

the sales velocity for this theoretical SaaS company:

( 100 opportunities per month  x $100 per month contract value x 5% win rate ) / 1 month  = $500 dollars per month -> this is an estimate of the current trajectory: each month, your sales team generates $500 worth of monthly recurring revenue (MRR)

But wait, it’s not over! Calculating your sales velocity is important because it helps you understand the upper and lower boundaries of your sales forecast.

Using sales velocity to see how far you can go


The upper bound of the sales velocity is the maximum amount of sales your organization can support.


Let’s say the maximum number of opportunities we can prospect with the current team increases to 150 (50% increase in productivity); the contract value stays the same at $100 MRR, and the win rate can increase to 20% (up from 5%) because your sales funnel changes (more interested buyers, more engaged followers); and the sales cycle decline to 2 weeks (from 4 weeks), due to your prospects being better qualified by sales.

Now our new sales velocity is:

( 150 opportunities per month  x $100 per month contract value x 20% win rate ) / 0.5 month  = $6000 dollars per month -> theoretically, you can increase your sales velocity ~12 fold.

doge wow

Breaking down the dreaded sales plateau: decompose the sales velocity equation to help you find your focus 

Number of opportunities per month – this factor can change based on the marketing efficiency. If you can scale the number of people that you can send your marketing message to, then this part of the equation grows

From our example: your opportunity-count changed your sales velocity by a factor of 50%

Average contract value: The market forces will shape your price. This factor is primarily by the number of features you have and the pricing charged by your competitors. Changes to this factor generally follows the pattern of stable, with big jumps as you launch newer and better versions of the product.

From our example: your ACV stayed stable.

Win rate %: this is the absolute key part of the equation. The better you market (showing impressions to people who are interested), the better your leads. The better you qualify your leads (only email contacting prospects that are very interested in the space you are marketing, versus blanket emailing people), the better the win rate % is.

From our example: increasing the win rate % increased your sales velocity a factor of 400%!

Sales cycle: this metric tends to change when your sales personnel are pursuing the right type of prospects.  The difference between pursuing loosely defined prospects vs focusing strictly on Ideal Customers (see our earlier blog post here) is huge.

In our example, by shortening the sales cycle and only going after people that our solutions can offer value to, we increased the sales velocity by a factor of 200%.

Wrap-up:  “Plans are worthless but planning is everything.” Start-up revenue forecasting is hard. However, if you measure your sales results and metrics consistently and use reasonable assumptions, you can gain a solid understanding of the metrics that affect your sales velocity, leading to better decision making over time!