How to Calculate Lead Velocity Rate (LVR)

Mike Preuss January 5, 2015

#Metrics

Welcome to the first post in our  “Most-Valuable-Metrics” (MVM for short) series. In this series we’ll be sharing some killer metrics that startups should be tracking, how to track them, and why they are important. The first metric for our MVM series is Lead Velocity Rate.

Jason Lemkin loves “Lead Velocity Rate”. It is his favorite sales metric and he argues it is the most important one in SaaS. Lead Velocity Rate is a term that sounds like something you might be tested in a high school advanced algebra class. In reality, it’s anything but.

The term is used to describe one of the single most important metrics in all of business. Simply put, lead velocity rate is most commonly defined as a metric that quantifies your business’ growth in terms of qualified leads. Some call LVR Lead Momentum while others call it Qualified Sales Lead Growth. For the benefit of your SaaS startup, it is also one that you should be calculating every month for the foreseeable future.

After reading Jason’s post, I was convinced I needed to track and grow this metric. I just had one question: how do you actually calculate Lead Velocity Rate?

Turns out it is just your basic growth formula (comparing the current month to the one before it). As long as you are using Qualified Leads and using a consistent formula and process you’ll be able to use this LVR rate for other sales models. Check out the equation below:

lvr_formula

Yes, “velocity” may be a bit of a stretch for this calculation but the point is clear, growing LVR will grow revenue. Lead velocity rate is hugely important for a number of different reasons. For starters, it is a metric that you can use to clearly predict not only future revenue, but LVR will act as an important piece of information to help with your long term marketing and product strategies.

What is great about LVR is that it is a future indicator of sales growth. Metrics like MRR & Revenue are all historic whereas LVR helps predict future growth.

Lead velocity rate, when combined with factors like projected revenue, can paint a very vivid picture about the future of your business in both the short and the long term.

 

We want to hear from you. What is your Most Valuable Metric? Tell us here and we will share the results with the contributors!

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