Weighted pipeline: bEFV as baseline expected value
Online version: https://funneleconomics.ai/resources/glossary/befv
bEFV (Baseline Expected Funnel Value) is the structural expected value of the funnel: each opportunity's amount multiplied by its stage win rate, without regard to current sales hygiene. bEFV is therefore a weighted pipeline whose weights are historically measured, not fixed, before any weighting by the age of the deals.
How is bEFV calculated?
bEFV = Σ (opportunity amount × stage win rate)
- Amount – the value of the opportunity in the period under review
- Stage win rate – of the deals that stood in this stage and were decided, the share that was won
The stage win rate is not a fixed percentage per stage. Funnel Economics calculates it from past periods, by sales rep, opportunity type, stage and period. That stage win rate is applied to every individual open opportunity.
The stage win rate is not a transition from one stage to the next. Such transitions are called stage-to-stage conversion. Funnel Economics reads them as volume, by count and amount, and does not form a rate from them.
Which values enter the formula depends on the time-series model. A PERFORM model measures the execution of a period and uses the pipeline at the start of the period. A BUILD model measures how the pipeline develops for future periods and uses the pipeline at the end of the period.
While a PERFORM period is still running, the PERFORM model uses the values at the end of the period. A BUILD model carries a bEFV at the start of the period as well as the bEFV at the end of the period.
Why does the pipeline total say little about expected revenue?
A pipeline total treats every open opportunity as if it were going to be won. An opportunity in an early stage counts as much as an opportunity just before closing.
bEFV weights every opportunity with the historical probability of its current stage. It follows arithmetically: if bEFV sits far below the pipeline total, a large part of the volume carries a low stage win rate.
What does bEFV leave out?
bEFV says nothing about the condition of the deals. In board language, bEFV is the face-value potential: the revenue value of the pipeline at nominal rates.
bEFV is the potential case. The age of the deals is only factored in by rEFV, and the calibrated forecast comes from cEFV. cEFV is the best case of the forecast range, not the realistic case.
bEFV is also value-blind. The stage win rate measures counts, not amounts: bEFV multiplies an amount by a count probability.
bEFV therefore makes two assumptions without checking either. The first assumption: a won opportunity is worth what it was at the start of the period. The second assumption: won opportunities are average in value.
How bEFV differs from a pipeline with fixed stage percentages and from rEFV
| Pipeline with fixed stage percentages | bEFV | rEFV | |
|---|---|---|---|
| Probability | fixed per stage | historically measured stage win rate | same as bEFV |
| Condition of the deals | left out | left out | weighted by SLA Health |
| Use | simple projection | structural expected value | risk-adjusted revenue expectation |
Related terms
- rEFV
- EVL
- cEFV
- stage win rate
- Conversion Rate
FAQ
What is the difference between a weighted and an unweighted pipeline?
An unweighted pipeline adds up the full amounts of all open opportunities. A weighted pipeline multiplies each amount by a probability of winning. bEFV is a weighted pipeline whose probability is the historically measured stage win rate, not a fixed percentage per stage.
What is the formula for bEFV?
bEFV is the sum, across all open opportunities, of amount times stage win rate. A PERFORM model uses the amount and the stage win rate at the start of the period; while the period is still running, it uses the values at the end of the period. A BUILD model carries one bEFV at the start and one at the end of the period, and what is valued there is the pipeline built up by the end of the period.
Is bEFV already a forecast?
No. bEFV is the potential case: the structural expected value, with no judgement on the condition of the deals. rEFV factors in SLA Health. cEFV calibrates rEFV with the historical value growth of existing deals and the inflow of new deals from prior periods; it is the best case of the forecast range, not the realistic case.