Pipeline Coverage: Definition, Formula and How to Read It
Online version: https://funneleconomics.ai/resources/glossary/pipeline-coverage
Pipeline coverage is the open pipeline amount divided by the remaining gap to target (target minus won). Every open deal counts at its full amount. Funnel Economics calls this figure nominal coverage and reads it together with HACR. How much of that amount is to be expected, pipeline coverage does not say.
How is pipeline coverage calculated?
Pipeline coverage = open pipeline amount ÷ (target − won)
- Open pipeline amount – the sum of the amounts of all open deals (an amount, not a count)
- Target − won – the remaining gap to target
The denominator is the gap to target, not the target itself: what has already been won is subtracted from the target.
Numerator and denominator belong to the same slice, for example the same opportunity type, the same period and the same level (a region, for example).
What is a good pipeline coverage?
There is no universal value. A classic rule of thumb names a fixed multiple. A fixed multiple assumes a win rate the business may not have.
The pipeline coverage a business needs follows from its own win rate, the share of won deals among decided deals. The calculation uses the qualified win rate (over qualified opportunities only), not the decided-row win rate (over all decided deals). An opportunity is qualified once it has passed the lead stages and stands in a stage the organisation classifies as an opportunity stage.
Pipeline coverage is also read over several periods. A level on its own is not a finding, a movement is. When the qualified win rate changes, the need for pipeline changes with it.
What does pipeline coverage not say?
Pipeline coverage does not say how much of the open pipeline amount is to be expected. That is why HACR, the Health-Adjusted Coverage Ratio stands beside it. HACR divides rEFV, the risk-adjusted revenue expectation, by the same gap. The finding is the distance between the two values.
High pipeline coverage beside a low HACR means: the target is covered on paper, but the pipeline carries less than its amount suggests. If both values are low, there is too little pipeline overall. A single number cannot tell the two cases apart.
If the open pipeline amount 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.
A gap to target is not automatically a pipeline gap. Before asking for more pipeline, ask whether the existing pipeline carries.
How pipeline coverage differs from HACR
| Pipeline coverage (nominal) | HACR | |
|---|---|---|
| Numerator | open pipeline amount | rEFV |
| Denominator | target minus won | target minus won |
| Question | How much pipeline stands against the gap? | How high is the risk-adjusted expectation relative to the gap? |
Related terms
- HACR
- rEFV
- Win Rate
- Strategic Decoupling
- EFV Density
FAQ
What is pipeline coverage?
Pipeline coverage is the open pipeline amount divided by the remaining gap to target. The gap is the target minus the revenue already won. Every open deal counts at its full amount. The figure shows how many times the open pipeline arithmetically covers the gap. How much of that amount is to be expected, pipeline coverage does not say.
How do you calculate pipeline coverage?
Pipeline coverage divides the open pipeline amount by the gap to target, meaning the target minus the revenue already won. Numerator and denominator belong to the same slice, for example the same opportunity type, the same period and the same level.
What is a good pipeline coverage?
There is no universal value. A classic rule of thumb names a fixed multiple and so assumes a particular win rate that may not hold in your company. How much pipeline you need follows from your own qualified win rate. What also carries meaning is how pipeline coverage moves over several periods, not a single level.
Is high pipeline coverage enough to reach the target?
No. Pipeline coverage counts every open deal at its full amount and does not say how much of it is to be expected. That is why HACR stands beside it; HACR divides rEFV, the risk-adjusted revenue expectation, by the same gap. High pipeline coverage beside a low HACR means: the target is covered on paper, but the pipeline carries less than its amount suggests.