Varos Glossary

## What is Lead Velocity Rate (LVR)

Lead Velocity Rate (LVR) measures the growth rate of qualified leads over a specific timeframe, typically from one month to the next. Expressed as a percentage, it can be a valuable indicator of a business's upwards (or downwards) trajectory. As a metric, it's particularly prominent in the SaaS space, though there's also value in measuring it as an eCommerce company.

## Why Measure LVR?

Most revenue-focused metrics tend to be lagging indicators of growth. Let's say, for instance, that a business's revenue topped \$30,000 in March 2023, then \$45,000 in April.

That \$15,000 in growth may have come about from sales efforts as far back as 2022. This means that while it may look like the business is experiencing positive growth on paper, there could be myriad problems below the surface, such as a broken sales pipeline or a sharp increase in customer churn

LVR, on the other hand, provides a more current, reliable growth indicator, the benefits of which include:

• The potential to identify bottlenecks in your sales pipeline.
• Easier benchmarking and goal-setting for your sales team.
• A more effective way of measuring performance for marketing campaigns or lead generation strategies.
• More effective forecasting and roadmapping.

Note that if your business lacks a sales team or has a relatively short conversion cycle, LVR isn't quite as valuable or accurate.

To calculate lead velocity rate, use the following formula:

This calculation will provide you with a value which you can then use to determine whether your business's growth has recently trended upwards or downwards. For example, if you attracted five qualified leads this month and last month you only brought in a single qualified lead, your velocity rate formula would look like this:

[(5-1)/1] * 100 = 400 percent.

## How to Contextualize Your LVR

LVR is a strong indicator of performance, but like any metric, it should not be measured in a vacuum. For instance, say one month you attract twenty new leads versus five the previous month. On paper, it looks like your business is performing well, right?

When you dig a little deeper, however, the data tells a different story — each of those five leads from the previous month brought in an average of \$1000 in revenue, while your twenty new leads only brought in \$100 each.

Because LVR can be so misleading when measured on its own, you need to contextualize it with other revenue-focused metrics such as:

• Cost Per Lead. How much money did your company invest into each lead, on average? Did you spend more or less compared to last month?
• MRR Growth. Has your business's monthly recurring revenue increased or decreased? If it's decreased even in the face of LVR growth, this could indicate problems with either your sales process or your product quality.
• Revenue Growth. Theoretically, a higher LVR should also mean higher monthly revenue.
• Average Order Value/Average Customer Spend. As indicated by the example above, it may sometimes be better to have a smaller customer base that spends more on average than a large number of customers who only make small purchases.
• Total Ad Spend/Return on Ad Spend (ROAS).  Did you spend more on ads this month, or less? Did the increased spending coincide with an increase in qualified leads?
• Returning Customers/Retention/Churn. Do you have a base of loyal recurring customers, or do people tend to only make a single purchase and then never do business with you again?