What Sales Leaders Should Know About Pipeline Coverage

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Feb 01, 2025

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Sales pipeline is the measure of how much potential revenue is floating in the pipeline compared to sales target. It’s an imprecise gauge (or in my case since I drive an EV the battery range estimate) of how much fuel I have to get to know where I need to go. Depending if I drive with the AC on or if I drive heavy footed I may or may not get there. Starting my quarter my sales leader has 3x in pipeline but because deals take too long or they don’t convert at the percentage I need I might miss my plan entirely.

Typically expressed as a multiplier, if your pipeline coverage is at, what is typically considered safe, 3x for a sales target of $1 million, it means you’ve got $3 million worth of opportunities marinating in that pipeline of yours. Over-reliance on pipeline coverage alone could lead you astray. Too low, and you're looking at a serious pipeline deficit that might end up making the bottom line squeak. Too high, and you're probably getting a bit optimistic with your sales team’s pipeline (some, or a significant portion, might be BS!).

One of my own GTM heroes, Dave Kellogg, doesn’t even know himself where the 3x rule came from.

So where does the magical 3x coverage ratio come from? I don’t know the history, but I can say that long before I saw — and I mean years — my first salesforce automation system, I heard sales managers speak of the rule of three. It makes sense: 2x seems tight and 4x seems rich. So, through the Goldilocks Principle, we ended up with 3x. ~Dave Kellogg

It’s like an oral tradition passed down between sales managers I guess. 3x! 3x! 3x! And it just stuck. When I first moved into sales planning I was told we need to have 3x pipeline. And so I’ve followed in those footsteps.

But we live in age of data! Surely we can equip sales leaders with actionable insights on managing pipeline coverage

Yes indeed. Because we know our win rate, doesn’t that mean that our pipeline coverage should be the inverse of our win rate? Well. That seems plausible. But what if your win rate is utter garbage (like 10%). Does that mean you need 10x pipeline? What’s going to happen is that your GTM engine is going to fill your pipeline is overinflated, under-qualified opportunities just to get to 10x pipeline. Even if you did have high signal-low noise pipeline I’d bet you’d exhaust your addressable market very quickly. If 10% was your win rate I’d take a hard look at your 1/ sales processes, 2/ value proposition, 3/ how the message is delivered by sales, and 4/ pricing and/or packaging. Something just isn’t right if you’re losing 90% of the time.

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Christmas just passed and I was hoping for a pipeline stuffer

In your sales process you’re going to discuss pricing. How and when you do it depends on the motion you run. What I’ve generally seen is a pricing page with list prices for the first and second bundle. The third bundle is labeled “enterprise" pricing” because the needs of the prospect outpace feature availability in Plan 1 and Plan 2. Also, lower pricing may away for P1 and P2 depending on the size of the purchase. Pricing starts at list (broad) and narrows as needs are more specifically identified. Those conversations may not happen until conversation #3 or #4 or later. Yet you have an opportunity in Salesforce with an amount that’s zero or blank.

I suggest adding in a default price to avoid null pipeline. Default towards your median instead of your average. Doing so will less often lead to pipeline deflation than inflation. At least that’s what I’ve seen the few times I’ve instituted this policy.

A certain % of my deals were generated in quarter

When a significant portion of your booked deals are generated within the quarter, pipeline coverage requires an extra layer of nuance. If, say, 25-30% of your deals consistently originate in the current quarter, you might have a bit more flexibility with your pipeline.

In such cases, it’s crucial to factor in the potential boost from these in-quarter deals when assessing your pipeline against targets. This doesn't mean you should overly rely on these deals, but acknowledge that they can help bridge gaps in coverage.

Let’s modify the pipeline ratio a bit.

Starting pipeline coverage ratio: 1 / Win Rate (WR)
PCR = 1 / WR

Adapted to:

PCR = (1 - Average % Closed in-Quarter) / WR
PCR = (1 - ACIQ) / WR

Jeremy Donovan at Insights Partners adds an extra wrinkle which I love. At the start of the quarter you have a fair bit of pipeline which I will call “Roll-In Pipeline”. It’s the pipeline you’re rolling over from a previous quarter into the new one. One extra exercise to do is to take a look at deals expected to close within the quarter that failed to do so. These are your pushed deals. Adding an extra hedge to the pipeline coverage we would modify the PCR to the following:

PCR = (1 - ACIQ) / (WR * (1 - % Deals that Push))
PCR = (1 - ACIQ) / (WR * (1 - %PUSH))

Now the opposite of a PUSH can happen. These are PULL deals. This is why it is so important to snapshot your pipeline. With pull deals subtract this out of the numerator.

PCR = (1 - ACIQ - PULL) / (WR * (1 - PUSH))

Here’s Salesforce Ben on creating pipeline snapshots

Here’s Hubspot Hacks on doing it in Hubspot.

Now this works well if your quarters are similar to one another. Q1 is the same as Q2 and so forth to Q4. Assuming that is NOT true then perhaps it makes sense to do this type of exercise by quarter. You might find that each quarter may require pipeline coverages!

What does the effect of Time on Pipeline Coverage?

Early in the quarter many operations teams find themselves in the sticky situation of plowing pipeline over (ick, past Close Dates) and closing stale pipeline out (ick again, dead deals lingering in the pipeline). If you broke down a percentage of deals closed in Month 1, Month 2, or Month 3 of a quarter you will typically find a large percentage of deals will close in Month 3 relative to target. BUT! You will also find PUSH deals will close in Month 1 of the quarter.

In fact, in a previous life my week 4 and week 10 have tended to be my most accurate forecasts.

I keep thinking about sports teams as well. Ever heard an announcer say “the 4th quarter is when this team really gets going”. It feels that way for some sales teams and I’ve had founders ask me ‘why is it that deals mostly close at the end of the quarter?’

Truth be told I don’t think this is on the sellers. Buyers are fully aware that at quarter’s end they could try to squeeze a better deal out of their sellers just because it’s the end of the quarter. And some, or many(?), sales teams will relent. I mean do it too. I wait until a Black Friday Sale comes along to make certain purchases. And face it, if you’re buying something from Salesforce just wait until January before making your move. It happens!

Segment your business!

If you have multiple business types you sell to then please try to segment your pipeline and results. Using a blend can make it really difficult to diagnose what’s going wrong with your results. Use industry. geography, deal size or whatever to segment the business. Doing this will enable you to do the following: