Lead Velocity: What Makes It the Most Important Metric for SaaS Businesses?

Author's avatar Analytics Mar 21, 2022 13 minutes read

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    Peter Caputa

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    If you’ve read anything about metrics, you know that you should monitor key performance indicators (KPIs) to track your business’s growth.

    But, of course, you know that the process isn’t as simple as “watch KPIs.” You have to choose what KPIs to keep an eye on in the first place.

    So, which stats should come first in your business performance dashboard when you run a SaaS business?

    Some experts recommend tracking lead velocity to monitor your business’s status. Let’s learn more about this metric and hear what SaaS experts have to say about it.

    What is Lead Velocity Rate (LVR)?

    According to HubSpot, lead velocity rate (LVR) is the rate that your qualified leads grow month over month. This metric focuses on the number of leads going into your pipeline rather than the speed they’re moving through it.

    It’s important to note that this definition refers to qualified leads instead of any lead. On a broad level, you can organize qualified leads into two types — marketing qualified leads (MQLs) and sales qualified leads (SQLs). MQLs show interest in your product, while SQLs are ready to buy a product.

    In sum, your LVR measures how many new people have a genuine interest in your product every month.

    How to Calculate Lead Velocity Rate

    You can calculate your lead velocity rate by subtracting last month’s number of qualified leads from this month’s number of qualified leads, then dividing the result by last month’s number of qualified leads. Multiply that number by 100 to get a percentage. As a formula, this calculation looks like this:

    Current month’s number of qualified leads – Last month’s number of qualified leads / Last month’s number of qualified leads x 100

    5 Benefits SaaS Companies Gain From Watching LVR

    Now that you know what LVR looks like, what can you learn from it? We consulted 10 SaaS experts about their experiences monitoring LVR. Here are the benefits of tracking LVR they named, as well as some of our insights.

    1. Tracking Your Business’s Health
    2. Adding Stability to Your Business
    3. Evaluating Your Growth Rate
    4. Understanding Your Product’s Strength
    5. Speeding Up Changes in Strategy

    1. Tracking Your Business’s Health

    Think of LVR monitoring as a regular “checkup” for your business’s health. Are you bringing in interested people every month to give you a solid base to market to?

    “Lead velocity rate is a key performance indicator for SaaS companies. It measures how fast leads are converted into customers,” says Mukesh K. Singhmar of MarAutomation. “Monitoring this metric can help you determine whether your marketing and sales efforts are effective and identify areas that need improvement. Increased lead velocity usually means higher customer acquisition rates and, ultimately, more revenue.”

    Singhmar continues, “LVR is a great measurement tool to help you determine whether or not your lead generation process is efficient and effective. If you notice that your LVR is dropping, it might be time to make some changes to your marketing strategy. Definitely one of the key metrics for measuring the health of your SaaS business, it allows you to resolve whether you’re growing your customer base at a healthy rate and whether you’re making enough progress towards profitability.”

    As Singhmar points out, LVR indicates your performance for both your sales and marketing efforts. Try measuring LVR for your MQLs and SQLs separately and together to see how your marketing and sales contribute to your overall LVR. A huge difference in their rates could tell you that you need to align your sales and marketing more effectively.

    2. Adding Stability to Your Business

    When you prioritize LVR in your metric monitoring, you’ll know if you have a stable enough business to handle difficult times.

    At SaaStr, Jason Lemkin notes many reasons why you should watch your LVR. One of the more overlooked ones he highlights is that it can “buck you up in the tough times.” If your revenue dips one month but you have a good LVR, you have a healthy pool of leads to tap into, you can work on making it up.

    If you want to stay strong when times get tough, keep an eye on your LVR. Make sure you always have a positive LVR so you can focus on your constantly growing qualified leads when you need to boost your revenue.

    Bonus tip: To make it even easier to recover from a rough month through your pool of leads, make sure you have a solid lead scoring system in place. Your sales team will be able to identify which leads to prioritize in your comeback plan.

    3. Evaluating Your Growth Rate

    LVR is a great KPI for measuring your business’s growth. A steady trickle of leads every month shows that people have an ongoing interest in your product.

    Motion Simulation’s Carl Panepinto says, “The most important benefit SaaS can achieve by monitoring LVR is to assess the number of leads monthly. This metric allows us to predict leads that can be gained every month. It is an excellent measure to get an idea about the company’s present and future growth.”

    When you watch LVR as part of your regular metrics tracking, you’ll build a record of your LVR growth patterns. Using those trends, you’ll be able to predict how many new qualified leads you’ll get in the future.

    Christiaan Huynen of DesignBro adds, “The most important benefit of SaaS I got from monitoring LVR was tracking our growth. Many times there was a high engagement rate and leads, but it wouldn’t coincide with sales.”

    Huynen points out how LVR can help you diagnose your sales performance: “So, it allowed me to monitor the activity and performance of my sales team. This showed that their work quality had declined, and it needed my attention. So, I hired an expert to train the sales representatives with all the latest tricks and tools to improve their efficiency and boost performance as well.”

    Growth has multiple dimensions, and your influx of leads is just one of them. When you know you have a healthy LVR, it’ll become easier to pinpoint where else you could have issues.

    By using Databox’s reporting software, businesses can easily track their LVR over time and see how it correlates with other key metrics like website traffic, lead generation KPIs, conversion rates, and sales. With this information, businesses can make informed decisions about where to focus their marketing and sales efforts to drive growth and improve their overall business performance.

    4. Understanding Your Product’s Strength

    When you track LVR and compare it to your sales and marketing KPIs, you’ll be able to tell when your product has a role to play in your growth.

    As Anna Pozniak of NetHunt CRM puts it, “LVR isn’t prone to fluctuation and provides you with a clear and reliable picture of your current pool of qualified leads. Based on this metric, you can identify whether or not your product needs to be changed. If there weren’t many changes to your sales team but your MRR growth isn’t keeping up with your LVR, you need to alter your offer to level up to the competition.”

    Pozniak says, “It also gives you an insight into the outcomes of your marketing activities. LVR is indicative of your demand generation performance: you can see which channels perform well and can be scaled, and which could be cut off due to ineffectiveness.”

    What’s the lesson to learn here? While LVR is a great metric to watch, you should monitor it alongside other metrics to quickly find the source of any issues or successes. Use a resource like a data dashboard to keep track of all your stats.

    5. Speeding Up Changes in Strategy

    Your marketing and sales strategy should adjust to sudden changes in lead availability. But, when do you know that should happen? If you measure LVR every month, you’ll see exactly when your leads start to fall and you should make changes.

    When you see your LVR going down, ask yourself these questions to look for reasons why:

    • Did I make any recent changes in my sales or marketing processes?
    • What channels have the lowest performance, and how can I improve them?
    • Does my sales team have the resources and support they need to do their best job?
    • What successful sales and marketing tactics can I double down on to increase my leads?

    If you start noticing too many weaknesses in your marketing tactics, look at your marketing strategy as a whole. You may need to do more audience research or reevaluate the channels you use.

    The 5 Best Ways to Optimize Your SaaS Lead Velocity Rate

    We asked SaaS experts to vote on the best ways to boost LVR based on WisdomPlexus’s writing on the subject. The most effective tactic for respondents was by far optimizing follow-up strategies, with 40% choosing that option. But, at least 10% of participants found any of these tactics useful, making them all viable.

    Best Ways to Optimize Your SaaS Lead Velocity Rate

    Let’s dig into each strategy a little deeper:

    1. Optimizing Your Follow-Up Strategy
    2. Improving Your Content
    3. Enhancing Your Lead Nurturing Strategy
    4. Using Automation Tools
    5. Optimizing Your Segmenting, Targeting, Positioning, and Differentiation Strategy

    1. Optimizing Your Follow-Up Strategy

    While LVR focuses on your overall rate of new leads, you’ll need a good lead retention rate to keep that number high. By staying on top of your follow-up techniques, you’ll maintain a solid base of leads to keep a net positive number going.

    “The LVR determines what changes you need to undertake in order to improve your lead acquisition and retention as a business,” adds Alina Clark from CocoDoc. “For us, a dip in LVR is more than often, a call to have a look at our follow-up strategies. You’d have significantly lower qualified leads if any part of your follow-up strategies fails.”

    LVR is as much about keeping leads in your pipeline as it is bringing them in. Don’t forget to nurture the leads you have right now, or your LVR will take a hit.

    Related: 36 Practical Tips for Writing A Great Sales Follow-Up Email

    2. Improving Your Content

    Content marketing is one of the hottest channels for generating organic leads. They take a reader from a search engine or direct link to a lead generation activity like a newsletter signup. If your content isn’t up to snuff, it won’t encourage visitors to take further action.

    If you notice any of these content marketing lead generation metrics lagging with your LVR, you might need to refresh content or revamp your strategy:

    • Time on page: We found that the average time on page for a blog post is about 3 to 5 minutes. If you notice a shorter time, your readers might be bouncing.
    • Email opt-ins: If you consider your email newsletter an important milestone in your lead pipeline, your opt-in rate could relate to your content performance. Track your signup sources using a dashboard software like Google Analytics so you know if your content isn’t contributing.
    • Organic links: Are people linking back to your content? In addition to boosting your SEO performance, strong backlinks diversify your lead sources.

    3. Enhancing Your Lead Nurturing Strategy

    After a qualified lead enters your pipeline, do they stay there? As leads drop from your pipeline, your LVR starts to drop, too. You need to have a strong lead nurturing strategy in place to keep your LVR growing every month.

    Try using these lead nurturing tips we received from sales experts to improve your LVR:

    • Putting an official, structured follow-up process in place that includes who will follow-up and when
    • Show extra value with tailored content, complimentary services or custom gifts
    • Send relevant and targeted emails (bonus points for including a personalized video)
    • Engage in your customers’ online communities
    • Prioritize leads with high lead scores in your interactions

    4. Using Automation Tools

    You have to stay on top of your sales and marketing to keep leads coming in and staying in your pipeline. Automation tools save you time and work on your processes.

    Your sales process alone offers plenty of opportunities for automation, such as:

    • Scheduling meetings and calls
    • Managing your workflow
    • Maintaining your email list
    • Assigning and scoring leads
    • Entering info into your CRM

    You can also try automating your reporting to evaluate your lead situation more quickly. It makes reporting faster and more accurate. Plus, it provides more opportunities to collaborate with clients and examine your competition.

    5. Optimizing Your Segmenting, Targeting, Positioning and Differentiation Strategy

    A segmenting, targeting, positioning and segmentation strategy emphasizes what makes your brand stand out and personalizes your marketing content for your audience. You can also call this strategy a segmenting, targeting and positioning (STP) strategy.

    Let’s explore each aspect of this strategy:

    • Segmenting: Organizing your audience into different groups (segments) based on their demographics, preferences, location or behavior
    • Targeting: Deciding what segments to prioritize and what marketing to match to each segment
    • Positioning: Determining where your product stands among the competitive landscape
    • Differentiation: Defining what makes your product stand out from its competitors

    An STP strategy leads to better-tailored sales and marketing by clearly defining your main benefits and the audience you want to target. With these aspects of your marketing determined, you’ll increase your chance of attracting qualified leads over unqualified ones.

    Hit Your LVR Goals With Databox

    As you’ve learned, you’ll need to track multiple metrics to get the most out of your LVR insights. You’ll need to see how your sales and marketing processes are performing to know the causes behind your LVR trends.

    That’s where Databox can help. Our data calculations pull data from multiple sources to calculate metrics like your LVR and most important KPIs. No more switching back and forth between platforms and plugging it all into a spreadsheet.

    Databox’s free-forever plan starts you off with three data source connections so you can see its power for yourself. Sign up today.

    Author's avatar
    Article by
    Melissa King

    Melissa King is a freelance writer who helps B2B SaaS companies spread the word about their products through engaging content. Outside of the content marketing world, she writes about video games. Check out her work at melissakingfreelance.com.

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