Lead Velocity Rate (LVR) : A Strategic Metric in SAAS
Startup Codex

"One thing that is great in SaaS [...] is You Can See The Future" Jason Lemkin says in this post, citing the benefit of recurring revenue.

But when it comes to predicting the future, Lemkin considers that sales pipelines are not worth much. Even for big companies. And sales as a metric is a lagging indicator and tells you only about the past.

He defends another metric he's already used at Adobe Sign: Qualified Lead Velocity Rate. The growth in qualified leads, measured month-over-month.

It's in real time, and brings a better anticipation of growth and revenue.

It's a measure that can become strategic by being used as a company objective, as long as it' s about Qualified Leads and there is a consistent process for qualifying them.

Lemkin discusses further in this post about the implications of using such a metric, including how to correlate it with sales metrics and sales team performance.

It’s real time, not lagging, and it clearly predicts your future revenues and growth. And it’s more important strategically than your revenue growth this month or this quarter.

  • If you set as a top corporate metric growing your LVR about 10-20% greater than your desired MRR growth — and you have a consistent sales team — you’ll hit your revenue goals.
  • And the great thing about LVR is while sales may ultimately have a quarterly variance, and while a lost renewal can hurt — there’s no reason leads can’t grow every single month like clockwork. Every single month.
  • If your leads are growing faster than sales, then an upgrade in sales will almost always lead to higher growth. Often, much higher growth.