Pipeline coverage: how much pipeline do you really need?

Pipeline coverage is the ratio between open pipeline and sales target: if you have 3 million in open deals and a quarterly target of 1 million, your coverage is 3x. The rule of thumb says 3x to 5x, and where in the range you should sit is governed by your win rate. Here is how to calculate it, what the right level is for you, and why the gap is usually covered most cheaply from your own CRM.

How do you calculate pipeline coverage?

The formula is simple:

Pipeline coverage = open pipeline in currency / sales target for the period

Two rules to make the number mean something:

• Only count deals that can close within the period. A deal with an expected close date next quarter should not count toward this quarter's coverage.
• Count unweighted pipeline. Probability weighted numbers hide the problem, because the weighting already assumes a win rate.

Example: the Q3 target is 1.5 million. Open deals with a close date in Q3 sum to 4.2 million. Coverage is 4.2 / 1.5 = 2.8x. Below the rule of thumb, time to act.

Why 3x to 5x specifically?

The rule of thumb is just inverted win rate with a margin. If you win 33 percent of your deals you need, in theory, exactly 3x. In practice you need a margin for deals that slip to the next quarter, shrink in value or die in silence. A rough guide:

Calculate on your own history instead of industry averages: closed won deals over the last four quarters divided by total closed gives you your actual win rate.

A warning in the other direction: coverage over 5x to 6x is usually not strength but an inflated pipeline full of deals that should have been closed as lost. It fools both the forecast and the prioritization.

What do you do when coverage is too low?

Three ways in with very different price tags:

1. Buy or generate new leads. A B2B lead costs a few thousand to generate, and new cold leads have the lowest conversion of any source.
2. Increase outbound prospecting. An SDR costs a full salary and months to ramp.
3. Work your existing CRM. The acquisition cost is already paid. According to MarketResearchFuture, 70 to 80 percent of all leads in a CRM never get followed up, and according to Forrester, 80 percent of leads marked as "not ready" buy something within 24 months.

Path three is almost always the cheapest per unit of pipeline, because the lead cost is already sunk and the contacts already know you. Segment out leads with last activity 4 to 18 months back, look for signals and work them with short personal emails. If you want to put a number on what sits in your CRM, there is Revexa's calculator.

How often should you measure?

Weekly, in the same forum as the pipeline review. Coverage is a leading indicator: it warns a quarter before the numbers do. Measure per salesperson and per segment too, an average of 3.5x can hide a salesperson at 1.5x.

Look at pipeline age at the same time. Deals that have sat in the same stage twice as long as your normal sales cycle should be excluded from coverage, otherwise you are measuring wishful thinking.

Common questions

Is 3x always the right target?

No. 3x assumes just over 30 percent win rate. Calculate backward from your own history, the range 3x to 5x covers most B2B companies.

Should you count weighted or unweighted pipeline?

Unweighted for coverage. Weighted pipeline is a forecasting tool, not a coverage metric, and mixing them makes both worse.

What is the cheapest way to raise coverage quickly?

Reactivating dormant leads in your own CRM. The cost per lead is already sunk, the list exists and the sales cycle is often shorter than for cold contacts because the relationship has already started.