Let’s dig in.
What Is Pipeline Coverage?
Pipeline coverage is a sales metric that compares the total value of all the opportunities in a sales pipeline to the sales quota for that specific period.
Pipeline coverage is often expressed as a ratio and is used to forecast sales and determine whether there is enough potential business in the pipeline to meet sales targets.
How Do You Calculate Pipeline Coverage?
Use this formula to calculate your pipeline coverage:
Pipeline coverage ratio = Total value of all the deals in a pipeline Total sales target value
For example:
If your sales target (quota) for the quarter is $500,000 and the total value of your sales pipeline for the same period is $1,000,000, your pipeline coverage ratio is 2:1.
So, how much coverage do you really need?
What Is a Good Pipeline Coverage Ratio?
It depends.
You need to look at your historical win rates to determine what your ideal coverage ratio should be. For example, if your win rates are around 25%, you’ll likely need a coverage ratio of 4:1 to consistently meet your quotas.
That said, a pipeline coverage ratio of 3:1 is a general figure that’s often cited as a benchmark.
In other words, to meet your targets, the total value of all deals in your pipeline should be three times your sales quota.
However, as mentioned earlier, there isn't a universal “ideal” coverage ratio.
That figure will vary from company-to-company.
The aim for a sales leader is to identify a coverage ratio that ensures that they’re hitting revenue targets during every sales period.
For instance, if your sales reps are excelling and closing deals rapidly, a 3x coverage may not be necessary – a 2:1 ratio could be enough to hit your targets.
Conversely, if your win rates are on the lower side, a higher figure of 5x pipeline coverage might be required to meet your quota.
Now that you have a rough idea of the numbers you need to shoot for, let’s go over how to evaluate your results:
How Do You Interpret Your Pipeline Coverage Data?
Just knowing what your pipeline coverage ratio is isn’t enough.
You need to use that information to draw inferences about your sales performance and take necessary action:
What Does a High Pipeline Coverage Mean?
When your current pipeline coverage ratio is higher than it’s been before, it usually means your sales team is struggling with converting.
They’re compensating for their low close rate by populating the pipeline with tons of leads.
Think of it like this: They're casting a wider net because they're not catching as many fish.
To fix this, some extra training could help them get better at closing those deals.
Alternatively, take another look at the leads they’re bringing in.
If they’re poor, that’s going to amplify the poor win rates.
It’s important to note that high pipeline coverage isn’t necessarily a problem in itself. It’s only an issue if you need more coverage than earlier or more than your competitors to hit your sales target.
What Does a Low Pipeline Coverage Ratio Mean
If your sales pipeline coverage ratio is lower than it’s been before or below industry standards, it could be due to one (or both) of these reasons:
1. You don't have enough top of funnel demand driven by marketing.
2. Your sales organization may be too focused on existing pipeline or existing customers, and not enough on prospecting.
Let’s go over each of them:
1. Poor Marketing
In the first scenario, when your marketing efforts aren't hitting their targets, you’re simply not getting enough leads into your pipeline.
The problem might be with the strategies you're using or how they're being executed. Maybe your marketing messages aren't resonating with your target audience, or perhaps the channels you're using aren't reaching your target audience.
To turn things around, consider boosting your marketing budget to give your strategies more firepower. It's also a smart move to level up your marketing team's skills and knowledge. This could involve training in the latest marketing techniques or bringing in fresh talent with new ideas.
2. Inadequate Prospecting
In some companies, marketing alone is tasked with generating new leads, but for most companies, the sales team shares this responsibility too. Unfortunately, the typical sales reps concentrate too heavily on closing deals and working existing customers and neglect new pipeline generation or prospecting.
When the sales team is too wrapped up in finalizing current deals, they can’t populate the pipeline with enough leads to maintain a healthy coverage ratio.
This is especially risky because it leaves the business vulnerable to periods of low activity once the existing deals are closed.
To avoid this, sales teams need to balance their focus. While closing deals is undoubtedly important, dedicating time and resources to continually prospect ensures a consistent and healthy pipeline, providing more stability and growth opportunities for the business.
Tip: Ideally, you should build a dedicated prospecting team. It's well known that people who are good at closing deals are usually not good at prospecting, nor do they enjoy doing so.
The highest-performing sales organizations have dedicated prospecting teams, often known as Sales Development Representatives or SDRs, so it's a worthwhile investment to build one.
How Often Should You Measure Pipeline Coverage?
It's important to check on your pipeline coverage regularly.
At a minimum, you should be doing this weekly, but ideally, a sales manager should know what their coverage is on a daily basis.
Why?
Big deals entering or leaving the pipeline can significantly swing your pipeline value and coverage ratios. Knowing the current state of your pipeline coverage helps guide your team’s efforts and ensure that you’re forecasting accurately.
If monitoring your pipeline coverage every day sounds like a lot of work, it is!
But not if you have the right tool to help you:
Scratchpad: The Easiest Way to Manage Your Pipeline and Forecast Accurately
Transform your pipeline management and sales forecasting experience with Scratchpad – a tool that is always connected to your CRM data in Salesforce and is designed for the way sales leaders and sales reps work.
Scratchpad gives you the visibility and functionality to maintain a healthy pipeline and forecast with confidence that you aren’t able to achieve when you’re hopping back and forth between spreadsheets and Salesforce reports.
It’s all about elevating efficiency without altering your existing workflow.
Your sales team can now zero in on the task they do best — generating new pipeline while progressing deals and closing revenue.
Here’s a snapshot of what Scratchpad can do for you:
- Visualize forecasts with trends analytics. You can monitor your total pipeline at a glance and compare your current state to past performance so you know whether you’re on track to hit your number.
- Spot gaps in your sales pipeline with deal spotlights. Stay alert with missing field notifications and ensure your deals are perfectly in sync with closing dates and forecasts.
- Automate forecast roll-ups from the sales floor to the executive suite. Gain insights into how opportunities at every level evolve with historical changes.
Try Scratchpad for free to make maintaining your ideal pipeline coverage a breeze!
3 Tips to Maintain a Healthy Sales Pipeline Coverage Ratio
If you need help maintaining the right coverage ratio, follow these guidelines:
1. Set Clear, Action-Oriented Goals:
It’s not enough to just tell your sales team to aim for a specific pipeline coverage ratio.
Give them specific, actionable goals that’ll help them attain those numbers.
For example, set targets like meeting with five new accounts each week or spending dedicated hours for networking and building connections at industry events. This gives your team clear directions and a practical way to bring in new leads and nurture the ones they already have.
2. Conduct Frequent, Insightful Pipeline Reviews:
Hold structured review sessions to assess how well sales opportunities are progressing. Use these meetings as coaching moments, sharing best practices for moving deals forward.
Focus on pinpointing common roadblocks in deal closure and brainstorm strategies to tackle them. Fortunately, with a tool like Scratchpad, this process becomes a breeze.
Why?
You can filter your pipeline by stages, to identify where these roadblocks most frequently occur, be it during the proposal, negotiation, or any other stage. Stepping in to help a sales rep has never been easier!
3. Focus on Attracting New Clients and Retaining Existing Ones
If you want to consistently meet your quota, you need to follow a strategy that balances winning new customers with nurturing current ones.
This can include setting up customer satisfaction programs and identifying more opportunities for sales within your existing client base. This can involve working with your customer success teams to identify which customers could benefit from upgrades or which ones are a good fit for cross-sells, etc.
The goal here is to keep an eye on the mix of new and repeat business in your pipeline and adjust your tactics accordingly.
What Are the Common Challenges with Using Pipeline Coverage as a Metric?
While pipeline coverage is a very important sales metric, tracking it in isolation can lead to certain issues:
A. Focus on quality vs. quantity
Focusing too much on pipeline coverage can lead to a quantity-over-quality issue. A sales rep might stuff the pipeline with low-quality leads just to hit the numbers, leading to wasted resources and poor conversion rates.
B. High coverage ≠ sales success
A high coverage ratio doesn't always mean sales success. It can create a deceptive sense of security, masking underlying issues in the sales process. For example, very high pipeline coverage could actually indicate poor closing rates.
C. Doesn’t account for different sales cycles
All products and services don’t have the same sales cycle. Using a uniform ratio might not accurately reflect the true state of your sales pipeline across diverse offerings.
D. Misguided pressure on the sales team
A heavy focus on maintaining the ratio can lead to unnecessary pressure on your sales team. This might divert their attention from closing deals or nurturing existing customer relationships in order to maintain a specific ratio.
Now that we’ve covered the basics of sales pipeline coverage, let’s get into where it fits among the other sales metrics you’re tracking:
How to Utilize Pipeline Coverage with Other Sales Metrics
To use the pipeline coverage ratio effectively, it should be integrated with a suite of other sales metrics to provide you with a comprehensive view of pipeline performance.
Look at these common sales metrics and how pipeline coverage can be used alongside them:
1. Win Rate
Understanding your win rate is key to determining your ideal pipeline coverage. If your historical win rates are low, you’ll need more pipeline coverage than other companies to consistently hit your sales targets. This compensates for the lower likelihood of closing each deal.
2. Sales Velocity
Sales velocity measures how fast leads move through your pipeline. A slow sales velocity is already concerning as it often points to snags in your sales process.
When coupled with high pipeline coverage, this issue is amplified as it means you have tons of deals that aren't progressing – potentially leading to lots of lost revenue.
3. Customer Lifetime Value (CLV)
By looking at CLV, you prioritize leads in your pipeline that promise more value over time, rather than those that might only boost short-term targets. This helps sales teams balance quarterly quotas with a long-term revenue goal.
4. Forecast Accuracy
Your pipeline coverage should also reflect how accurate your historical sales forecasts have been. If your forecasts tend to be off, adjust your coverage ratio targets to better align with reality.
5. Customer Acquisition Cost (CAC)
When you're looking at your pipeline coverage, don't forget to think about how much it costs to acquire each new customer.
You want to make sure that aiming for a high pipeline coverage doesn’t end up costing too much in getting each customer on board.
Pipeline Coverage FAQs
Let’s go over two common questions about sales pipeline coverage:
1. What’s the Difference Between An Unweighted and Weighted Pipeline?
If you want different perspectives on your pipeline, you can opt for an unweighted or weighted pipeline.
In unweighted calculations, you simply total the potential revenue of all deals in your pipeline. In contrast, a weighted sales pipeline considers both the deal value and the likelihood of each deal closing, based on its current stage in the sales process.
The unweighted pipeline can be useful for long-term strategic planning and sales goal setting, providing a ceiling of potential. The weighted pipeline, by incorporating current deal statuses, is better suited for short-term planning and making quick real-time adjustments to sales strategies.
2. What Is a Pipeline Review Meeting?
A pipeline review meeting is a strategic session where the sales team's pipeline is thoroughly analyzed to assess the progress and health of various sales opportunities.
It is used to determine if a sales rep has enough coverage, identify pipeline bottlenecks, forecast sales, and strategize on moving deals through the pipeline more effectively, aligning with quotas.
Cover Your Bases with Sales Pipeline Coverage
Tracking your sales pipeline coverage is a good way to keep track of how your pipeline is progressing and if you’re going to meet your targets.
However, tracking it in isolation can be misleading.
That’s why it only needs to be a part of your suite of pipeline management metrics, not the sole indicator of success.
Fortunately, with a pipeline management tool like Scratchpad, maintaining a healthy pipeline has never been easier.
Sign up for Scratchpad today to take your Salesforce pipelines to the next level.
