Learning Velocity Rate
Thoughts on Buffer CEO’s top reason for not selling his startup.
I really enjoyed reading Buffer CEO Joel Gascoigne’s recent blog post on the top reason we haven’t sold our startup. Not because I’ve founded my own startup or have had to deal with multiple acquisition offers, but because Joel uses learning, and the potential to learn in the future as part of his framework for making major professional decisions. For anyone who follows Joel or the Buffer blog, it’s clear that individual growth is part of his team’s fundamental values. Notice I didn’t say personal growth or professional growth, but individual growth- how each individual is able to be a slightly better person today than they were yesterday. I think that learning is really the cornerstone towards being a better individual. As we learn, we grow, and as we grow we become better individuals. Similar to Joel, I also share a learning centred decision making framework; one where I also introduce a slightly more quantitative approach to evaluating possible decisions in my life. I calculate my personal LVR i.e. my personal Learning Velocity Rate (a variation of the Lead Velocity Rate used in B2B sales). I find that calculating my personal LVR to be a great metric for making critical decisions in my life. Reading Joel’s blog post, I think he’s actually done the same thing by “focussing on learning and experiences rather than money”.
Step 1: Understanding the Lead Velocity Rate as Context
I’ve been in B2B SaaS sales for a while now, so I’ve become pretty familiar with the Lead Velocity Rate. For those of you that want to learn more about it, I highly recommend reading this blog post written by Jason Lemkin of SaaStr. In a nutshell, Lead Velocity Rate is a measure of how quickly your startup is able to grow the number of qualified leads it generates month over month. The belief is, provided you have a competent sales team, consistent increases in LVR, will lead to long term revenue growth for your B2B SaaS startup. Basically, if you’re increasing the speed at which you’re able to generate qualified leads, you should be able to close more deals and consistently grow revenues.
Here’s the formula for calculating Lead Velocity Rate:
Step 2: Calculating Qualified Leads and Qualified Learning Opportunities
A qualified lead will get rid of tire kickers, window shoppers, and prospects that have a low shot at closing. A qualified lead is typically one where the prospect you’re working with has the following characteristics:
Budget allocated to the project.
Authority to move forward and sign off on the deal.
Need for your specific product, service or solution.
Timeline to purchase your product and/or complete the project.
This is often referred to as the BANT method and enables you to focus on the leads that are most relevant and likely to close i.e. the ones that qualify for your time and effort going forward.
As a result, the first step to calculating your Learning Velocity Rate is to qualify your learning opportunities. Start off by making a list of all the things you’re learning now (i.e. your current scenario) and expect to learn in the future (i.e. your new scenario). Typically, I have a one current scenario list (based on what I’m learning now), and two new scenario lists (based on the two possible paths forward). I’ve adapted the BANT method for qualifying sales leads, into a similar BANT method for qualifying learning opportunities below. For each learning opportunity ask yourself the following questions:
Benefit: Is there a clear benefit to what I’m learning? (e.g. emotional, financial, physical, experiential etc.)
Advance: Is what I’m learning pushing me outside of my comfort zone?
Need: Is what I’m learning valuable to me personally? Why?
Timeline: Does what I’m learning get me closer to where I want to be 18 months from now? How?
Once you’ve had a chance to use the BANT method to analyze what your learning, answer this last question:
Does this learning opportunity qualify for my time right now?
For every learning opportunity that you’re able to answer YES to, mark that down as a qualified learning opportunity. From there, calculate your total qualified learning opportunities for each decision making scenario. Once you’ve done this for each scenario, you should have a pretty good idea of what your qualified learning opportunities in each case.
Step 3: The Final Learning Velocity Rate Formula and Calculation
Plug in your values into the following LVR formula:
To help illustrate, I’ve broken down Joel’s two scenarios using the Learning Velocity Rate formula below:
versus
While I obviously don’t have all of Joel’s raw data, judging from his blog post, I think it’s pretty clear that his LVR associated with the Decision to Grow Buffer was greater than the Decision to Sell Buffer.
Conclusion:
I find that calculating my personal LVR is an easy metric for me to understand. It helps me look at decisions in my life when there’s a fork in the road, and apply a bit of science in a way that makes sense to me. It keeps me focussed on achieving the necessary short term goals, that will hopefully contribute to achieving my long term goals as well. By consistently increasing my LVR over time, I fight the need for instant gratification and instead look to increase my depth of knowledge and individual growth.
“Money will come and go, but experiences and learning is what I define as true wealth. This is why we try to frame a decision of whether to sell around the opportunities for learning and experience in each path.” — Joel G.
Whether or not you do your own detailed LVR calculation, I do believe that doing some version of this analysis every 6 months is a worthwhile exercise; towards fighting complacency and towards pursuing true wealth. Looking back on the past five years, I’ve chosen to pursue a higher LVR instead of better monetary rewards for three major decisions in my life. While I’ll save the details for another blog post, the outcomes of these decisions have made me believe in the validity of the metric, and the necessity to continue chasing learning and experience. I hope you come to the same conclusion, and wish you all the best on finding your own true wealth.
P.S. If you end up using this post to calculate your own Learning Velocity Rate or have any thoughts on how I could improve it, I’d love to hear from you. Thanks for reading. =)
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