Over the last several years, and especially since the onset of the “subscription-as-a-service” economy, we’ve seen an onslaught of new metrics and KPIs by which executives are tracking not only the growth of their business, but also just as importantly, the speed at which it’s growing. Why, you ask? Well, because revenue growth itself is actually a trailing indicator of success—how you did, not how you’re going to do. And it’s the latter that really tells your key stakeholders, both internal or external, the health of the business.
Two of the most popular modern-day metrics—both of which sound like they’re coming straight out of a physics class—are lead velocity rate and sales velocity rate, the first of which measures your business’s growth in terms of qualified leads, while the latter looks more closely at sales revenue. Here’s how they look on paper:
Simple, right? And important. In fact, well-known SaaS entrepreneur and venture capitalist Jason Lemkin once called lead velocity rate “the single most important metric in SaaS” because it’s real-time rather than lagging, it can help you more clearly predict revenue, and it can act as a critical KPI for helping your long-term sales, marketing, and even product strategies. In other words, it lets you “see the future.”
So, suffice to say, that got me thinking: If sales and lead velocity rate are such critical, future-telling growth KPIs; and if metrics like closed deals, Q/Q and Y/Y growth, and revenue are all lagging; and if for decade upon decade, businesses with channel partner programs have struggled mightily to measure the effectiveness of their channel sales and marketing (and now customer success) activities, why don’t we come up with a metric based on sales and lead velocity rate to help executives and channel leaders gain a clear and concise understanding of exactly how their channel partner programs are performing.
So, we did. We’ve named it “channel velocity rate” (CVR) to no big surprise. And it’s really not that complicated when you think about it.
First and foremost, let’s talk about what CVR isn’t. It’s not a measurement of how many partners have logged into your portal this month. It doesn’t tell you who has or who hasn’t logged in. It doesn’t tell you how many emails a partner has sent, how many InMails they’ve attempted, or how many calls they’ve made. And it definitely, absolutely, 110 percent does not tell you who earned the most SPIFFs, who spent the most MDF or co-op dollars on USB sticks and ballpoint pens, or who earned a 10/10 on a quiz last month.
In fact, it lets you do away with all of the mundane, ineffective, outdated KPIs the channel has been forced to rely on for decades and instead replaces them with a single, consistent formula for setting growth targets and measuring both lead generation and sales effectiveness—spanning as wide as your entire channel program or as narrow as an individual channel manager, channel partner, or partner sales rep.
But enough talk. Here’s how can you start measuring channel velocity rate right this very minute.
So we now know what channel velocity is and isn’t, let’s talk about how to calculate it and dig into the key levers in the equation:
As you can see, channel velocity rate more closely resembles sales velocity rate than it does lead velocity rate in that it focuses on multiple variables within your channel sales and marketing activities, rather than simply qualified leads, which are much more difficult to measure and oftentimes much less accurate in the channel. Meanwhile, data points such as active partners, registered deals, average deal size, win rate, and length of sales cycle should be ready and available to easily report on if you’re using the right software for your channel.
Knowing how to calculate your channel velocity rate is only part of its overall value. Knowing how to use it to improve the performance of your channel partners and the individual levers that optimize your overall score is just as, if not even more, valuable.
Tracking and plotting your channel velocity rate on a monthly, weekly, or even daily basis provides you with a proven, effective, and consistent metric by which to monitor and report on the overall health of your channel partner program as long as you have the data. If you don’t have a system or the resources to automatically provide them, here’s an Excel spreadsheet I’ve put together to help you at least get started with a manual process that you can eventually automate with a partner sales acceleration platform such as Allbound.
One of my favorite things about channel velocity rate is its flexibility. It is a great tool to measure the effectiveness of not only your overall channel, but also your individual partners simply by drilling a little further into your data. We call it partner velocity rate, and here’s how it looks:
To start with, rather than measuring the number of active and total partners in your channel, partner velocity rate takes into account the number of active and total sales reps at an individual partner. Then, it uses that individual partner's data for registered deals and referrals, average deal size, close rate, and days in pipeline.
By tracking and plotting the velocity rate of each of your partners, you can immediately start zeroing in on and improving the performance of individual partners and even their individual sales reps to help improve your overall channel velocity rate.
Well, plain and simple, the answer to that question is unfortunately “no.” Like most anything in business, channel velocity rate is just one of many factors that—when used strategically or combined with other tactics, data points, and strategies—can have a dramatic impact on your business. But when it comes to the channel, not only is CVRe (and partner velocity rate) a hugely improved and more accurate indicator of your channel program’s growth, but it’s also the first data point to help you predict growth, measure it, and make sure you’ve got the data, knowledge, and resources to be doing more of it in the future.
And boy, oh boy, will your boss’s boss be happy to hear that.