Pipeline Coverage - Secret Weapon for Sales Managers
One of the most common questions that sales managers ask their reps is, “Do you have enough pipeline to hit your goal?”. In my experience, the correct answer back to any sales leader is always, “There is no such thing as enough pipeline, I will go find more!”. In this post we'll explore how to answer this question with metrics, and how you can gain confidence in your pipeline.
With the end of the year coming up quickly, my clients have been turning to me asking which of their sales reps will hit their goal based on what they’ve closed and what they have open in their pipeline. Most companies have a good idea of their pipeline coverage at the company level but often don’t have it broken down to the rep level where it’s needed by managers trying to make sure each of their reps is in position to hit their quota.
Ways to looks at Pipeline Coverage
There are two main ways to track pipeline coverage. The first is looking at all raw open pipeline. This does not factor in where the opp is in the purchasing process. When you look at raw pipeline, obviously if a rep has less open pipeline than their quota, that’s a big problem. That means they could win every single deal and still not have a shot at reaching quota. The general rule of thumb is that your pipeline should be 3-5 times the size of the goal you need to hit. This can vary from business to business, but having at least 3x pipeline coverage is a good ratio to target.
The second way to measure pipeline coverage is using weighted pipeline. This means you apply a percentage to each opp based on its stage. These percentages should be based on historical close rates. For example, if historically 50% of deals that reach the stage of delivering a quote to the prospect end up being closed won, then your open opportunities in the quote stage should carry a weight of 50% the expected amount. If you measure pipeline in this fashion you'll find you don't need as much coverage as when looking at raw pipeline, because you have a clearer picture of the value of your current pipeline. For weighted pipeline, 1-2x coverage should give your reps a great chance of hitting their goals.
How to calculate and track Pipeline Coverage
The calculations for pipeline coverage are relatively easy. Combining the calculations to one table, and tracking them by rep is the part that's tricky. To do so requires you to create metrics that pull in bookings and open pipeline from your CRM. Then pull all these numbers out to spreadsheet so that with the help of Vlookups you can aggregate the numbers at the rep level. Next, manually input targets and do the division to get pipeline coverage (Open Pipeline / Quota).
Seems pretty straightforward -- the only problem is that you have to go through the whole process every time you want to see updated data. This is why we at Rekener created our Sales Rep Scorecard app. Sales Rep Scorecards automate your KPIs so you can see metrics like Pipeline Coverage every day and easily change the date ranges to look at coverage for the current month, quarter, or tear all at the click of a button. Check out a sample below!
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Mike is a BizOps Strategist at Rekener. Mike works with Rekener customers to help them optimize their analytics and go-to-market strategy using the Rekener Platform. Working with dozens of best-in-class businesses gives Mike a diverse perspective on best practices for analytics, operations and strategy. Prior to joining Rekener, Mike held Sales and Operations positions at Carbon Black, Confer, and ZeroTurnaround. Mike's sales background keeps him focused on helping the teams on the front lines achieve their goals.
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