Software Growth

LVR (Lead velocity rate)

Lead velocity rate is the month-over-month growth in qualified leads. Jason Lemkin argues it predicts future revenue better than revenue itself.

Lead velocity rate, or LVR, is the percentage growth in your qualified leads from one month to the next. Jason Lemkin of SaaStr popularized it in a 2012 post titled "Why Lead Velocity Rate (LVR) Is the Most Important Metric in SaaS." His argument is that revenue tells you what you did a year ago, while qualified leads tell you what will happen next.

How to calculate LVR

Example: you had 200 qualified leads in March and 230 in April. LVR is (230 - 200) / 200 = 15%. If May brings 253, LVR is 10%. The number is growth, so it behaves like a monthly growth rate, and you can compare it with your MRR growth rate.

Why Lemkin cares about it

Lemkin points out that sales in a given month come from work started long before. Qualified leads are real time and can grow steadily, while closed revenue is lumpy. In his post he says that if LVR is growing 10% to 20% faster than the revenue growth you want, and your sales team is consistent, sales will follow leads over a quarter or two.

He also uses it as a diagnostic. Falling revenue with strong LVR points to a sales execution problem. Falling revenue with weak LVR points to a product or market problem, because leads are not showing up.

The catch: define "qualified"

LVR only works if the lead definition is strict and consistent. Lemkin stresses that you need a rigorous scoring system so only truly interested prospects count. If you count every newsletter signup, LVR will rise while revenue does not. Use one definition, such as marketing qualified leads or sales qualified leads, and do not change it midstream. A lead scoring model helps with consistency.

How to use it

  • Set a target tied to revenue goals. If you want 8% monthly revenue growth, aim for LVR above that.
  • Watch the trend, not one month. Seasonality and campaigns create noise, so use a three-month average.
  • Pair it with conversion. More leads that convert worse do not help. Track win rate too.
  • Compare it with pipeline. LVR looks ahead, and pipeline coverage checks that the current quarter is covered.

When LVR is less useful

With very small numbers, percentages swing wildly. Going from 5 qualified leads to 8 is 60% growth and means little. Use LVR once you have a few dozen qualified leads a month, and before that watch the absolute count. It is also designed for sales-assisted businesses, where leads turn into revenue through a process. For a fully self-serve product, signups and trial conversion play the same role.

It is also about volume, not efficiency. A rising LVR bought with expensive ads can hurt customer acquisition cost. Look at both.

Sources

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