Drive Better Sales Velocity: A Key Measure of Growth

Sales velocity is a crucial metric for any insurance agency aiming for long-term sustainability and growth. As the high tide of the current hard market begins to recede, only agencies with a robust and sustainable sales process will be well-positioned to drive meaningful, organic growth. At DOXA, we believe that understanding and optimizing sales velocity is key to navigating both current and future market conditions effectively.

What is Sales Velocity?

Sales velocity measures the amount of new business generated in the current year as a percentage of the previous year’s commissions and fees. For instance, if your brokerage earned $1 million in commissions last year and generated $100,000 in new commissions this year, your sales velocity would be 10%. This metric offers a more dynamic view of growth than traditional measures, as it reflects the effectiveness of your sales efforts in real-time.

The Relationship Between Sales Velocity and Core Metrics

Sales velocity is not an isolated metric; it is closely related to other key performance indicators. It helps firms identify their leakage rate—the difference between organic growth rate and new business rate. Leakage often results from lost accounts or ineffective sales strategies. By minimizing these causes of leakage, agencies can optimize their sales velocity and enhance overall performance.

Sales velocity also provides reliable insights into sales success, regardless of market conditions. In a hard market with elevated premium rates, other growth metrics might be skewed by increased commissions. Sales velocity cuts through this noise to provide a clearer picture of your agency’s true sales effectiveness.

Why Sales Velocity is a Vital Measurement Tool

A well-managed agency uses data to drive strategic decisions, including personnel management. Sales velocity is a powerful indicator of how effectively an organization’s producers are performing. Regularly reviewing sales velocity can help pinpoint trouble spots and ensure that your growth is truly organic—driven by strategic initiatives and active sales efforts, rather than simply benefiting from market conditions or existing business.

Low sales velocity might indicate issues such as underperforming producers. Since this metric excludes revenue from existing policies, it focuses solely on new business. Sharing sales velocity data with your team can underscore the importance of proactive selling and maintaining profitability.

The Benefits of Strong Sales Velocity

As market conditions evolve, particularly when they begin to soften, carriers will seek firms that demonstrate a consistent focus on growing new business. A strong sales velocity can make your agency more attractive to carriers looking for profitable partnerships.

New customers not only bring greater value but also contribute to the overall health of your organization. Producers who excel at uncovering new markets, implementing aggressive marketing strategies, and reaching out to prospects will enhance your sales velocity and strengthen your value proposition.

Additionally, a commitment to growth, even during challenging times, can positively impact how potential buyers view your agency. During the sale process, buyers will scrutinize whether your organic growth stems from new business or is merely a result of favorable market conditions.

Preparing for Rate Trends with Sales Velocity

Sales velocity can also help your agency prepare for shifts in rate trends. As market conditions shift to less generous environments, firms that rely solely on high premiums for growth may struggle. High-growth firms, on the other hand, consistently double their revenue every five years and are not dependent on external factors.

Strategies to Increase and Maintain Healthy Sales Velocity

To enhance and sustain a robust sales velocity, agencies should focus on targeted action plans. DOXA recommends aiming for a sales velocity of 15–20% to achieve predictable, profitable organic growth. Here are some strategies to improve your firm’s sales velocity:

1. Explore Niche Markets: Agencies that specialize in specific industries or geographies often experience higher organic growth compared to generalists. Positioning your firm as a trusted advisor rather than just a vendor can lead to more substantial growth.
2. Improve Business Mix: If your agency primarily handles personal lines, consider expanding into commercial lines. Investing in commercial producers can enhance your ability to write larger, more complex accounts.
3. Gain Access to New Markets: Expanding into new niches may require access to new markets. Joining an agency network can provide opportunities to obtain coveted appointments that might be difficult to secure independently.
4. Set Individual Goals with Accountability: For experienced producers, set goals that include both new business and sales velocity components. Tailoring goals to each individual’s capabilities can drive better performance.
5. Enhance Sales Training and Mentorship: Implement a comprehensive training plan that includes mentorship. Agencies with a strong mentor structure often see lower failure rates among new producers.
6. Align with Industry Standards: Track sales velocity at both the firm and individual levels, comparing it to industry benchmarks. According to DOXA’s financial management system, the top 25% of firms achieve a sales velocity of 22%, compared to the average of 14%.

Bottom Line

Sustainable organic growth driven by a predictable sales velocity remains one of the most controllable methods for elevating your firm’s performance. As market conditions evolve and carriers become more open to working with a diverse range of agencies, those with strong sales velocity will be well-positioned to capitalize on new opportunities. At DOXA, we believe that by focusing on sales velocity, your agency can not only drive revenue growth but also attract potential partners and prepare for future market shifts. Are you and your producers ready to leverage this powerful metric for long-term success?