{"id":1686,"date":"2021-12-30T17:29:27","date_gmt":"2021-12-30T17:29:27","guid":{"rendered":"https:\/\/sellingsherpa.com\/?p=1686"},"modified":"2022-04-09T02:31:05","modified_gmt":"2022-04-09T02:31:05","slug":"pipeline-coverage-treasure-or-trash","status":"publish","type":"post","link":"https:\/\/sellingsherpa.com\/index.php\/2021\/12\/30\/pipeline-coverage-treasure-or-trash\/","title":{"rendered":"Pipeline Coverage: Forecasting Treasure or Trash?"},"content":{"rendered":"
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I’ve always felt<\/em> that pipeline coverage is a lazy and inaccurate metric for forecasting. It made my usually well-tuned mathematical spidey sense tingle… and not in a good way. My concern was that pipeline coverage would vary wildly during the quarter such that one would actually need different target coverage ratios at different points in time. Moreover, a decent amount of business gets created and closed during the quarter – even in Enterprise. However, I’d never properly done the math.<\/p>\n\n\n\n

Recall that pipeline coverage is defined as follows:<\/p>\n\n\n\n

\"pipeline<\/p>\n\n\n\n

The general rule of thumb is that pipeline coverage should be \"\frac{1}{win. So, with a win rate of 33% you’d want a 3x coverage ratio. If one’s win rate were 20%, then 5x. In fact, this range of 3x to 5x is pretty common. <\/p>\n\n\n\n

As I mentioned, one of the things that has bothered me about pipeline coverage is that a decent amount quarterly bookings come from deals that don’t even exist in CRM at a given point in time. While that could be because reps are ‘hiding’ deals, it happens naturally for deals with shorter sales cycles such as most SMB deals or even incremental upgrades in Enterprise. But, it struck me (I assume I’m not the first one to think of this) that one can adjust the pipeline coverage goal formula as follows:<\/p>\n\n\n\n

\"target<\/p>\n\n\n\n

By way of example, imagine the win rate for deals in the pipeline at the start of any given quarter were 20% and 30% of bookings have been created & closed in any given quarter. Then, the target pipeline coverage ratio would be:<\/p>\n\n\n\n

\"target <\/p>\n\n\n\n

That is all well and good for the start of quarter pipeline coverage target. But, does the target need to vary as the quarter progresses in order to forecast accurately?<\/p>\n\n\n\n

To get to that answer, I found it helpful to make the following simplifying assumptions:<\/p>\n\n\n\n