Read on to explore everything you need to know about pipeline coverage, including why it’s important, how you can calculate it, and 4 proven ways to improve it when needed.
- Traditional sales rule of thumb says 3:1 is the ideal sales pipeline coverage ratio.
- The total opportunity value in your pipeline should always be at least twice the size of your sales target.
- High pipeline coverage enables more predictable revenue, optimizes sales resources, and flexibility to prioritize high-potential deals.
- Performing a pipeline analysis gives you the visibility needed to improve pipeline coverage.
- Low pipeline opportunity value indicates the need for better lead gen efforts, while low conversion rates indicate a need for sales process improvements.
What is sales pipeline coverage?
Sales pipeline coverage is the ratio between the total value of opportunities in your pipeline and your revenue targets for a particular time period.
It’s a valuable metric that enables sales teams to be proactive about pivoting strategies to reach their targets. When you know where you stand in relation to sales goals, you can implement the right actions needed to achieve them.
Sales pipeline coverage is calculated by taking the sum of all deal values in your pipeline, then dividing it by your sales target. For example, if your total pipeline is valued at $500,000 and your sales quota is $100,000, your sales pipeline coverage ratio would be 5:1.
A common sales rule of thumb is that an ideal pipeline coverage ratio is 3:1. This can vary depending on your industry, product, and sales cycle, but it’s best practice to have at least twice the value of your total sales goal in your pipeline at any given time. It’s not possible to convert every single potential deal, so you always need the extra opportunities in your pipeline in order to hit your targets.
Benefits of a High Sales Pipeline Coverage Ratio
Maintaining high sales pipeline coverage creates more predictable revenue because you can reliably expect to hit your sales goals. Conversely, when your sales pipeline coverage is low, you’ll need to convert a more challenging (and sometimes impossible) percentage of pipeline opportunities, making the likelihood that you’ll hit your targets less certain.
Regularly calculating sales pipeline coverage gives you insight into where you need to allocate your time and resources. Put most simply, a high ratio means you need to focus on conversion, while a low ratio means more emphasis is needed on lead generation.
Ideally, your marketing and sales teams should be aligned enough to partner on maintaining high pipeline coverage at all times. Your marketing team continually works to generate quality leads while your sales team converts them at a regular rate.
Higher likelihood to hit targets
Calculating sales pipeline coverage creates important awareness that, as mentioned, enables you to be more proactive about taking action to hit your sales goals. As such, your sales team is more likely to hit those targets on a regular basis.
Flexibility to prioritize
A consistently high sales pipeline coverage ratio allows you to prioritize the most high-potential, high-value opportunities in your pipeline rather than scrambling to convert enough deals overall. Over time, this flexibility can increase important long-term metrics like revenue earned, customer retention, and customer lifetime value.
4 Ways to Boost Sales Pipeline Coverage
Perform a pipeline analysis
A sales pipeline analysis evaluates how effectively your sales tactics are moving deals through the pipeline. It looks at your pipeline both holistically and stage-by-stage. These dual views allow you to consider the health of your pipeline as a whole while also recognizing individual tactics, processes, and approaches that need improvement.
Performing a periodic sales pipeline analysis helps you operate with continuous improvement in mind, optimizing in real time rather than doing so reactively (i.e. after missing a sales target).
Optimize your lead gen strategy
Your lead generation strategy is the foundation on which the rest of your pipeline is built. If you aren’t generating a healthy amount of leads at the top of the funnel, your sales pipeline coverage will be consistently lower. If this is the case for your company, reexamine your lead gen tactics and look for new ways to get more leads into your pipeline to increase its total value.
Define your sales process
When you define your sales process, you clearly outline the people, processes, and tools that are leveraged to move leads from initial awareness to converted customers. At many companies, this process is too loosely defined and can vary by sales team, sales rep, or other factors.
A defined and consistently enforced sales process creates higher levels of pipeline predictability and a better ability to pivot the process as needed to increase pipeline coverage.
Equip your sales team
Sales teams must be equipped with the tools and resources they need to execute your sales process effectively. Onboarding, training, and strong sales enablement tactics all contribute to more confident and effective sales employees.
If you see a high number of leads entering your pipeline but a lower-than-expected conversion rate, this should absolutely be an area of focus to increase your sales pipeline coverage.
Over to You
A visible sales pipeline empowers you to take control of your revenue potential with stronger, more intentional sales strategies at every stage of the B2B buyer journey. Over time, it helps you achieve more predictable revenue streams that lead to higher growth.
Xactly Forecasting® delivers data-informed pipeline analytics to drive consistent sales execution and accurate forecasting for accelerating predictable revenue.