Just Can’t Get Enough

Figuring Out Your Pipeline Coverage Multiple

Same Old Song and Dance

Pipeline. The sum of all deals that a rep could potentially close at a future date (this month, quarter, year, etc.).  It’s the lifeblood of B2B sales. No pipe, no chance of hitting the year. Too little pipe, same result.  Why? Because reps can’t close what they don’t have, and the reality is that reps won’t win every deal they go after. 

A-player reps understand this completely. They never stop seeking new deals to work. The ranks of your Bs, Cs, and Ds are filled with reps who set themselves for failure by undervaluing the importance of generating new deals and actively fine-tuning a healthy pipeline. So, the rule should be to create as much pipeline as possible, right?  Just can’t get enough of it? 

Actually, no. A rep only needs to maintain a certain amount to boost their success of hitting quota — and the number has a direct relationship to the ARR dollar value of that quota. Put simply, a rep’s pipeline coverage multiple is typically a single-digit number (2, 3, 4, etc). Multiply this number times the quota amount to get the rep’s required amount of pipeline.

A Change Would Do You Good

Here’s a practical way to calculate pipeline coverage multiples:

  • Calculate: How do you know how much is enough, or which multiple to use?  Start by taking a look at your win percentage for the year. Also, take your organization’s selling trends over the past 6, 12, 18, and 24 months into consideration. Assume that momentum will continue, and use your judgment for new products.  Take your win percentage and divide 1 by that number (ex. a win percentage of 25% would mean a coverage multiple of 4  —  1 / 25%). That’s your coverage multiple. Tip: Reps might have different pipeline coverage multiples based on what they sell. Be sure to filter by any meaningful territory or product segments that apply to each rep when calculating their multiple.
  • Limit: Beware of coverage multiples that are too high. Too much pipeline can mean that a rep is sitting on too many parking lot deals–deals that sit at future dates while the rep pays attention to other deals. This might be a sign that it’s time to add another rep to your team. Just be sure to take a close look at the rep’s deals. Some of them could be aged out or have been pushed too many times to be real.

Parking Lot Party

Avoiding Pipeline Parking Lots

Same Old Song and Dance

We’ve all been there as leaders in sales and sales ops. We’re humming along with our usual forecasting cycle and there it is: a huge chunk of pipeline sitting on the same date, usually the last day of the month, quarter, or year (looking at you, December 31st).

This favorite tactic of B2B salespeople everywhere — that is, parking their pipeline at the end of a time period — makes perfect sense. It allows reps to keep active deals in the projected calendar month, quarter, or year while offering the maximum amount of time to close them and avoid closing them out if they stall. It’s also a great way not to have to worry about predicting close dates down to a specific day on the calendar, something anyone involved in a complex selling process can tell you isn’t easy.

For sales leaders, on the other hand, the resulting parking lot is less of a tailgate and more of a traffic jam. All of those parked deals across the full sales team adds up quickly. Throw in pipeline that routinely sits in the same stage too long for every deal, and the resulting gridlock can reduce your ability to forecast down to a rush-hour pace.

A Change Would Do You Good

Here are some practical ways to clear out your parking lot pipeline:

  • Close dates: Try regular pipeline reviews plus bi-weekly or monthly required pipeline cleanups (ex. All pipeline with a current month close date has to be moved out of the current month by the 20th if it hasn’t closed yet, depending on your sales cycle, of course). Even better, create CRM workflows that automatically move out the pipeline by the agreed-upon date. This achieves the same goal while making it so reps don’t have to routinely update dozens (or hundreds) of close dates artificially (move them to the next month-end date). They can spend their time working later-stage deals, and you get a more accurate near-term forecast. Combine this with required minimum pipeline coverage amounts by period to balance for deal slippage. Tip: avoid making the last day of the month/quarter/year off limits: reps will pick another date as their go-to and it’ll be harder to spot their parking lots.
  • Deal stages: Use a similar CRM automation method to move deals back (or close them out) if they’ve been in a deal stage for a certain number of days (ex. Deals that have been in Stage 1 for 45 days automatically get closed as lost). This keeps deal velocity at a reasonable rate, reveals potential issues at each stage, and identifies which deals the reps are actually working. Tip: review stage durations every three to six months to see which stage has the most slowdown. It might be a sign that your verifiable outcomes at that stage are misaligned with the true selling process and need to be redefined.