# Health-Adjusted Coverage Ratio (HACR) and Nominal Coverage

> The Health-Adjusted Coverage Ratio (HACR) divides rEFV by the gap to target and is read as a pair with nominal coverage. Formula and example.

Canonical: https://funneleconomics.ai/resources/glossary/hacr

HACR (Health-Adjusted Coverage Ratio) is rEFV divided by the remaining gap to target (target minus won). HACR is read only alongside nominal pipeline coverage. The distance between nominal pipeline coverage and the Health-Adjusted Coverage Ratio is the finding. The pair shows how far the risk-adjusted revenue expectation differs from the open pipeline volume.

## How is HACR calculated?

:::formel
Nominal pipeline coverage = open pipeline volume ÷ (target − won)

HACR = rEFV ÷ (target − won)

- Open pipeline volume – the sum of the amounts of all open deals (an amount, not a count)
- rEFV – the risk-adjusted revenue expectation for the same open pipeline
- Target − won – the remaining gap to target
:::

Both ratios divide by the same gap. The difference is the numerator: nominal pipeline coverage counts every open deal at its full amount, HACR uses rEFV.

For the nominal ratio, see [pipeline coverage](https://funneleconomics.ai/resources/glossary/pipeline-coverage).

How rEFV comes about is explained in the entry on [rEFV, the risk-adjusted revenue expectation](https://funneleconomics.ai/resources/glossary/refv).

Numerator and denominator belong to the same slice, for example the same [opportunity type](https://funneleconomics.ai/resources/glossary/opportunity-type), the same period and the same level (a region, for example). If that slice has no target, there is no HACR. That is a finding, not a zero.

## Why is HACR only read as a pair?

HACR is the second half of a pair and says nothing on its own. The finding is the **distance** between nominal pipeline coverage and HACR.

High nominal pipeline coverage beside a low HACR means: the target is covered on paper, but the pipeline carries less than its volume suggests.

A low HACR beside an also low nominal pipeline coverage is a different finding: there is too little pipeline overall. A single number cannot tell the two cases apart, and the recommendations are opposite.

:::example
Illustrative example with invented numbers: the gap to target is €1,830,000. The open pipeline volume is €5,120,000, rEFV is €1,483,000. Nominal pipeline coverage is €5,120,000 ÷ €1,830,000 = roughly 2.8x. HACR is €1,483,000 ÷ €1,830,000 = roughly 0.81x. The finding is the distance between the two values.
:::

A low HACR does not yet name a remedy. Whether more inflow or a higher stage win rate is the lever is decided by a separate test.

Coverage is also read over several periods. A level on its own is not a finding, a movement is.

If pipeline volume at period end grows over several periods while rEFV falls, the pattern is called Strategic Decoupling. More on this in the article on [Strategic Decoupling, when the pipeline grows and its expected value falls](https://funneleconomics.ai/resources/patterns/strategic-decoupling).

## What is a good HACR value?

The method sets no target value for HACR. What is read is the distance to nominal pipeline coverage and the movement over periods.

The nominal pipeline coverage a business needs can be calculated instead: from the business’s own [win rate, the close rate in sales](https://funneleconomics.ai/resources/glossary/win-rate), rather than from a constant. The calculation uses the qualified win rate, not the decided-row win rate. An opportunity is qualified once it has passed the lead stages and stands in a stage the organisation classifies as an opportunity stage. A fixed multiple assumes a win rate the business may not have.

## Why can HACR not be averaged?

HACR is not additive. HACR is a ratio with its own denominator, and the denominators of the levels differ. The HACR of a parent level is therefore not the mean of the levels below it.

Comparing regions means comparing rEFV and the gap to target for each region, not the ratio.

## How HACR differs from nominal pipeline coverage

| | Pipeline coverage (nominal) | HACR |
|---|---|---|
| Numerator | open pipeline volume | rEFV |
| Denominator | target minus won | target minus won |
| Question | How much pipeline stands against the gap? | How large is the risk-adjusted revenue expectation relative to the gap? |

## FAQ

### How do you calculate pipeline coverage?

Nominal pipeline coverage divides the open pipeline volume by the remaining gap to target; every open deal counts at its full amount. Definition, formula and reading are in the glossary entry on pipeline coverage.

### What is a good HACR value?

The method sets no target value for HACR. What is read is the distance between nominal pipeline coverage and HACR and the movement over several periods, not a single level.

### How does HACR differ from nominal pipeline coverage?

Both ratios divide by the same gap to target, meaning the target minus what has been won. Nominal pipeline coverage puts the open pipeline volume in the numerator, every open deal at its full amount. HACR puts rEFV in the numerator, the risk-adjusted revenue expectation for the same pipeline. The finding is the distance between the two values.

### Can the HACR of several regions be averaged?

No. HACR is a ratio with its own denominator and is therefore not additive. The HACR of a parent level is not the mean of the levels below it, because the gaps to target differ in size. Comparing levels means comparing the amounts underneath: rEFV and the gap to target for each level.