Concept:

In an Agile software development environment, a part of the Scrum framework, Sprint is a time-boxed event for the scrum team to deliver a small product increment which is typically a releasable product. Usually, Sprints are one to four weeks long. Every sprint, the scrum team picks up a number of product backlog items and make a commitment to move them to a done state as per the definition of done. The size of each product back item is generally expressed in terms of story points. They are like units of user stories that can be addressed in a sprint. A number of story points completed at the end of each sprint provide a very good understanding of the team’s capacity or WIP (work-in-progress) limit. Depending on the complexity of sprint backlog items and level of productivity, the team can complete a varied number of story points at the end of each Sprint. In order to estimate the average velocity of the Sprint, the Product Owner simply uses the arithmetic average formula. See the below example.

Example:

Let’s say we have completed several sprints and we have a record of the number of story points completed in each sprint.

Sprint 1

Sprint Backlog Items = 5 

Total Story Points Targeted = 22

Total Story Points Completed = Sprint 1 Velocity = 18

Sprint 2

Sprint Backlog Items = 6 

Total Story Points Targeted = 24

Total Story Points Completed = Sprint 2 Velocity = 20

Sprint 3

Sprint Backlog Items = 7 

Total Story Points Targeted = 32

Total Story Points Completed = Sprint 3 Velocity = 24

Sprint 4

Sprint Backlog Items = 6 

Total Story Points Targeted = 26

Total Story Points Completed = Sprint 4 Velocity = 26

Average Sprint Velocity

Total Sprints = 4 

Average Sprint 4 Velocity = (Sprint 1 Velocity + Sprint 2 Velocity + Sprint 3 Velocity + Sprint 4 Velocity) / Total Sprints

Average Sprint 4 Velocity = (18+20+24+26)/4

Average Sprint 4 Velocity = 22 Story Points