Sales pipeline health as an expected value: rEFV
Online version: https://funneleconomics.ai/resources/glossary/refv
rEFV (Risk-Adjusted Expected Funnel Value) is bEFV weighted by SLA Health. The weighting uses measured factors per band. rEFV thereby factors sales pipeline health into the expected value of the pipeline.
How is rEFV calculated?
rEFV = Σ (opportunity amount × stage win rate × health factor)
- Amount × stage win rate – the opportunity's contribution to bEFV, the structural expected value of the pipeline
- Health factor – the measured factor of the health band the opportunity is in
SLA Health has three health bands: HEALTHY, DELAYED and STALLED. What is compared is the opportunity's total age in the funnel. HEALTHY runs up to the first SLA value of the stage (first threshold on the total age). DELAYED runs up to the second (second threshold on the total age), and STALLED lies beyond. The customer sets both SLA values per stage and opportunity type.
The health factor is measured, not set: rEFV works with measured factors per band. The health factor is not capped at 1.
rEFV as this entry describes it is calculated by the optional add-on Funnel Economics Strategist. The dashboards of Funnel Economics Core show a simplified rEFV by health status. The two values differ; bEFV is the same in both.
What does rEFV show that bEFV does not?
bEFV weights every opportunity purely with its stage win rate. Which health band the opportunity is in changes nothing about bEFV.
rEFV shows what the distribution of the pipeline across the health bands means for the expected value. The difference between bEFV and rEFV is EVL, the distance between two expected values.
There is no target value for the ratio of rEFV to bEFV. A verdict on the pipeline comes from the comparison with the actual result.
How rEFV differs from bEFV and cEFV
rEFV sits between bEFV and cEFV: bEFV is the basis of rEFV, and cEFV builds on rEFV. cEFV calibrates rEFV with the historical value growth of the existing deals and adds the expected inflow of new deals.
| bEFV | rEFV | cEFV | |
|---|---|---|---|
| Calculates | amount × stage win rate | bEFV weighted by SLA Health | rEFV, calibrated, plus expected inflow |
| Health bands | left out | measured factor per health band | inherits the basis of rEFV |
| Role | potential case | risk-adjusted revenue expectation | best case of the forecast range |
Related terms
FAQ
What does sales pipeline health mean in Funnel Economics?
Funnel Economics uses SLA Health to classify every open opportunity as HEALTHY, DELAYED or STALLED. It compares the opportunity's total age in the funnel with two SLA values the customer sets per stage and opportunity type. rEFV weights the expected value of the pipeline with measured factors per band.
How does rEFV differ from bEFV?
bEFV multiplies each opportunity's amount by its stage win rate and leaves SLA Health out. rEFV additionally multiplies by the measured factor of the health band the opportunity is in. The difference between bEFV and rEFV is EVL.
Why is there no target value for the ratio of rEFV to bEFV?
The factor per health band is measured and not capped at 1. The ratio of rEFV to bEFV therefore says nothing fixed about the pipeline on its own, and values above 1 occur. A verdict on the pipeline comes from the comparison with the result actually achieved, not from a threshold on this ratio.