(This post originally appeared on LinkedIn here.)
In this post I will share some practical experience regarding pipeline coverage and tips to improve this important topic.
About 20 years ago was the time for me when selling started to turn from art into science. I was confronted with the request to provide pipeline coverage of 3:1. This meant that for a remaining quota of $1M I should provide $3M of pipeline in that period.
I understood from day 1 in sales that the health of my pipeline defined my success. What I didn’t understand was how a standard ratio, applied to all quota carriers in the company globally would carry any value - no matter what tenure, territory, country, vertical, customer segment, existing vs new customer, etc?
To put it into perspective: I was one of 20 quota carriers in Germany at the time. Although I was 5% of the sales team I provided in excess of 20% in bookings and earned a spot in the top 1% of about 1,000 sellers globally in 2003 and in 2004. I achieved this with a pipeline ratio of about 1.6:1 and delivered in excess of 1.8 of my quota. It was done with two customers that earned a spot on the list of top 5 customers globally during that time and where I was lucky to have broad and deep relationships on all levels - from practitioner level up to C-level.
A few years later, I moved into management and served at several companies but the requested ratio of 3:1 became a companion. It didn’t matter what subsegment of the technology market the companies served, if they were an established provider, a "new kid on the block" or if they were pre or post IPO, etc. What I witnessed was that most of my peers "officially” accepted it and managed their teams against it to stay compliant. I observed an amalgam of the famous "chicken and egg" situation together with "fake it till you make it". As a result a lot of time and energy was wasted by reps and leaders trying to stay compliant with ambitious or even fake pipeline information. A bit like shadow boxing but with pain.
With the changed market dynamics since 2022 it is a great time to reconsider how revenue leaders approach this subject and change what was considered conventional wisdom for well over a decade. Here are some ideas that might help you:
Stop asking for 3:1 pipeline coverage because it will stimulate the wrong behavior.
Understand your company's real ratio by diving deep into recent deals. Differentiate required ratios for similar patterns (example: Installed base 2:1 and new customer 6:1)
Develop ways you can compress the steps in the buyer's journey. Maybe it will not reduce the cycle time it takes for getting a win but it will certainly optimize the time and energy your organization is putting in.
If in H2 2023 some reps still feel entitled to not have to stick to their differentiated ratio and build pipeline accordingly - Let them go.
Most reps who don’t have enough pipeline are lacking skills, confidence or inspiration. This can be solved by great leaders like you.
Have an extreme state in mind and work backwards. Like "what would be required to achieve a 100% close rate and hit your number?"
Having the right amount and quality of pipeline will solve a lot of issues and will increase your financial runway. It’s not easy in the rather noisy tech marketplace but mastering it continuously will increase your attractiveness for investors, employees, partners and ultimately customers.