Sales pipeline coverage ratio: a guide

Posted May 19, 2023

By Serena Miller

Editor, Sales Best Practices at Outreach

All sellers understand the importance of creating a sales pipeline and closing deals, but those who find consistent success also recognize the value of accurately calculating and managing pipeline coverage.

But too often, sales teams rely on outdated, fragmented point solutions or manual methods for data collection. These inadequate tools result in pipeline coverage gaps, rep underperformance, and surprise shortfalls. Over time, organizations fail to meet revenue targets. Until they can improve their performance, sales leaders lose their peers’ confidence. 

To effectively deliver on winning strategies, sales teams require quality leads and revenue goals — both of which demand adequate pipeline coverage. Sellers need processes and tools that help them assess pipeline quantity, quality, and maturity to be able reach their targets. 

Here, we’ll discuss everything you need to know about sales pipeline coverage ratio, including how to calculate it accurately, how much you need, and how to manage coverage to improve your productivity, performance, and predictability. 

What is pipeline coverage? 

Sales pipeline coverage is typically calculated and discussed as a ratio, which enables teams to understand the percentage of pipeline they’ll need to close to meet their sales goals.

Sales pipeline coverage is the ratio between the total dollar value of your sales funnel (all opportunities) and your revenue targets (the percentage you need to close). It’s a crucial tool that managers and reps use to evaluate the likelihood of meeting quota. For example, if your sales target for the quarter is $100,000 and the total value of your sales funnel for the same period is $250,000, your pipeline coverage ratio is 2.5. 

You must know how to calculate pipeline coverage to manage it effectively. A weak ratio can help you spot early warning signs and take corrective action, while a strong ratio can indicate healthy strategies that your team should duplicate or standardize. 

How to calculate pipeline coverage 

To measure pipeline coverage, you’ll need the total dollar value of your sales funnel and the total value of your revenue targets. The traditional formula sellers use to calculate sales pipeline coverage is as follows:

Pipeline coverage ratio = Total pipeline value ÷Total sales target value

For instance, if your total sales target value for the year is $1 million and you have a total pipeline value of $4 million, you would have 4X pipeline coverage. Your coverage ratio, then, would be 4:1, meaning that your total pipeline is four times your quota. In this scenario, your team would only need to close 25% of the pipeline to meet their sales goals for the year. 

While some teams still calculate pipeline coverage using this formula, many now leverage sophisticated sales tools to calculate a more precise ratio. Sales execution platforms, for example, instantly capture data across the entire sales funnel and process, then automatically calculate pipeline coverage (among other valuable metrics) for a completely accurate, up-to-date measurement. 

You should establish the ideal pipeline coverage for your business to help your team further refine their calculations.  To know how much coverage you need, it is essential to have a good pulse on where you should be at any given moment.

How much pipeline coverage do you need? 

It’s important to note that there isn’t a single, one-size-fits-all method for determining the right amount of coverage for your business. Many sales and marketing managers collaborate with their senior colleagues or C-suite leaders to establish an ideal ratio. Others use a generic goal — such as 3X or 4X pipeline coverage — as a starting point.

Your sales team can also use sales activity metrics to help them improve their current pipeline, including:
  • Average deal size - This metric is calculated by adding up the total revenue achieved in a given period (e.g., per quarter) and dividing it by the number of closed/won opportunities for the same timeframe. 
  • Average sales cycle length - The average sales cycle length refers to the amount of time it takes for an initial lead to become an actual paying customer. 
  • Customer acquisition cost (CAC) - Calculate CAC by dividing the sum of your marketing and sales costs by the number of closed deals during a particular time period. 
  • Qualified leads - While 61% of B2B marketers send all leads directly to sales, only 21% are actually qualified; so it’s crucial to standardize lead qualification and track how many qualified sales opportunities are in the pipeline at any given time.  
  • Win rate - To calculate win rate, divide the number of closed/won deals by the number of opportunities created during the same timeframe.

Each of the above metrics will help your team keep tabs on all the moving parts within the pipeline and use this information to allow them to maintain a healthier pipeline. Over time, this analysis will  give leaders a deep understanding of all active deals and identify anything that may be slowing them down. From there, they can more easily determine a pipeline coverage ratio that makes sense based on their unique business’s data.

Once your team establishes the right pipeline coverage ratio, they can more easily perform focused calculations for specific sales opportunities. 

What’s the difference between pipeline coverage and forecast coverage?

Accurate forecasts lean heavily on the sales pipeline as their foundation. While pipeline coverage illustrates the various potential customers as they move through different stages in the buyer's journey, forecast coverage offers a more detailed view of each individual sales opportunity. Forecast coverage is a weighted measurement that uses historical win rate data and your quota for a given timeframe to determine how much of your pipeline is covered by your forecast. 

Let’s say, for example, that your sales target value for this year is $1 million and you have 4X pipeline coverage, or a 4:1 pipeline coverage ratio. You’ve applied historical win rates to that same pipeline and have calculated a forecast of $600,000 for the year. Therefore your forecast coverage is 60%. 

By monitoring their pipeline coverage consistently, sales teams can make more accurate forecast coverage calculations, which enables more confident, reliable predictions for future sales. 

How often to measure pipeline coverage 

While the frequency your team should measure their pipeline goals will depend on your  business needs and goals, there are some best practices you can follow as a general guide. 

For instance, reviewing coverage on a daily basis and establishing a regular interval to measure current and future coverage (e.g., once a week) is a great way to familiarize yourself and your team with up-to-date realities and expectations. This is a time-consuming, burdensome feat without the proper tools, but a sales platform can help managers and sellers use historical data from every part of the pipeline to quickly perform these measurements. 

In fact, the right sales technology can automatically collect and analyze accurate, updated data and enable your sales and marketing teams to use their pipeline coverage ratio efficiently. Instead of wasting time manually pulling data — which, without the right tools is often incomplete — powerful sales tools ensure accurate, up-to-date results and complete visibility into the pipeline.

How to manage pipeline coverage

Your pipeline coverage is an excellent diagnostic tool for understanding the health of both  your sales pipeline and process. Implementing and fine-tuning your strategies based on your pipeline coverage can help you identify what’s working, what’s not, and course-correct at-risk deals before it’s too late. 

Only 30% of organizations say they’re properly equipped to use their data to improve their strategies. Investing a data-driven approach to pipeline coverage can become a true competitive advantage. To do this, sales leaders must collaborate to create plans and goals that reflect accurate, up-to-date pipeline coverage calculations. 

This is especially critical if your business has multiple sales teams with different pipelines. Training your sales teams to pursue opportunities based on precisely calculated pipeline coverage ratios and goals empowers them to focus their efforts on the highest-value areas. 

To monitor their sellers’ effectiveness, sales leaders can measure team members’ progress based on pipeline quality, quantity, maturity, and coverage gaps. This requires two things: a well-implemented CRM and a centralized sales execution platform that brings transparency, real-time access, and up-to-date data together in a single, user-friendly place.

Create and manage your pipeline with Outreach 

Calculating and using your pipeline coverage ratio based on complete and well analyzed data is vital for establishing winning sales and marketing plans, identifying opportunities, and closing deals. But without the right tools, leaders and sellers struggle to ensure there’s enough coverage to create successful strategies and deliver on their goals. 

Outreach’s pipeline management capabilities help sales and revenue operations leaders maximize their sales pipeline coverage. With tools that offer an uninhibited view into pipeline coverage — including built-in win modeling, at-risk deal spotting, and full opportunity history — Outreach can help your team understand, accurately forecast, and seamlessly execute on their sales pipeline. 

Want to learn more about how your team can improve deal health and pipeline coverage? Watch our on-demand webinar, "How to spot deal risks and act with urgency," or request a demo of Outreach today.


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