# Cost of Inaction in the Sales Pipeline: What EVL Shows > Cost of inaction in sales: EVL is the gap between two expected values, not lost revenue. How to recognise the pattern and how to read EVL. Canonical: https://funneleconomics.ai/resources/patterns/cost-of-inaction Cost of Inaction is the Funnel Economics name for EVL. EVL is the gap between the expected value of the open pipeline and the expected value that prices in the age of the deals. EVL is not lost revenue and has no fixed threshold. If bEFV stays stable while rEFV falls, that can point at execution, not the market. ## The pipeline is there, and revenue falls short of it The sum of open deals looks good. It is stable or even growing, and on paper it covers the gap to target several times over. Still, quarter after quarter, revenue won falls short of what the pipeline seemed to promise. For the executive team that is an uncomfortable position. The obvious explanations are the market, the product, or too little pipeline. Before one of them is accepted, it is worth looking at three quantities that can be formed from your own opportunities. All three quantities are expressed in euros. bEFV is the structural expectation placed on the open pipeline. rEFV is the same expectation, weighted by the age of the deals. EVL is the gap between the two. The pattern has a clear shape: bEFV stays stable, rEFV falls, and EVL rises. The method reads this constellation as a possible pointer to execution, not to the market or the product. ## The stock ages, and the expectation ages with it Two expected values describe the same open pipeline. [bEFV, the structural expected value](https://funneleconomics.ai/resources/glossary/befv), multiplies each opportunity's amount by its stage win rate. The stage win rate is the share won among the decided deals that stood in that stage. How old the deals are plays no part in bEFV. [rEFV, the risk-adjusted revenue expectation](https://funneleconomics.ai/resources/glossary/refv), takes age into account. rEFV is bEFV weighted by SLA Health. How the weighting is done differs between the two components of Funnel Economics; the last section names the difference. [SLA Health, the classification by age](https://funneleconomics.ai/resources/glossary/sla-health), places each open opportunity in one of three bands: HEALTHY, DELAYED or STALLED. An SLA here is the time you allow a deal. Your organisation sets two values for it per stage and opportunity type. What is compared is the opportunity's total age in the funnel. HEALTHY runs up to the first SLA value of the stage, DELAYED up to the second, and STALLED lies beyond. If bEFV stays stable, the structural expectation of the pipeline has not changed. If rEFV falls at the same time, the difference lies in the weighting by health band. The constellation is therefore first a statement about the stock and its age, and can point at execution, not at the structural expectation. Which measured factor in rEFV accounts for the gap has to be read before the gap is attributed to the age of the deals. Three questions are easily confused here, and only the first is part of rEFV: | Question | Quantity | Yardstick | |---|---|---| | Is this deal old for its stage? | health band of SLA Health | total age against the SLA values of the stage | | Is this stage slow? | [BPV (Build-to-Perform Variance)](https://funneleconomics.ai/resources/glossary/bpv) | time in the stage against its SLA, per stage | | Did this deal move? | [Dormant Opportunities](https://funneleconomics.ai/resources/glossary/dormant-opportunities) | a stage change, a promotion or entry into the funnel in a period | The health band says nothing about standstill. An opportunity can move up a stage every week and still sit in the STALLED band, because it is old overall. ## EVL measures the gap, not a loss [EVL (Execution Value Leakage)](https://funneleconomics.ai/resources/glossary/evl) is the difference between bEFV and rEFV. EVL Ratio puts that amount in relation to bEFV. EVL is expressed in euros and is not a lost amount: no money has left the bank account. Both sides of the calculation are expected values. An expected value is not a cash flow: money moves when a deal is won, not when a weighting is applied. What EVL quantifies is therefore narrower than “lost revenue”. EVL says how far rEFV, which values the age of the deals, departs from bEFV. rEFV is an expected value, not a lower bound. :::merksatz EVL is the gap between two expected values for the same pipeline. It shows how far the expectation falls once deal age is priced in, not a cash loss. ::: ### What is read is the direction, not a single value There is **no fixed threshold** for EVL or EVL Ratio. What is judged is the ratio of EVL to bEFV against its own history, in the same model, as a series across several periods. A single value describes one period. It becomes a statement only in comparison: higher than in the prior periods and rising, or unchanged. A fixed percentage as a cut is ruled out, including a newly set one. :::example Constructed example with invented numbers, not a benchmark: a company looks at four quarters. The sum of the open pipeline grows from €11.8M to €13.1M. bEFV stands at €4.7M in all four quarters. rEFV falls from €4.13M through €3.88M and €3.83M to €3.41M. EVL rises accordingly from €0.57M through €0.82M and €0.87M to €1.29M. The reading: the pipeline has grown, its structural expectation has stayed the same, and the gap to the risk-adjusted expectation has more than doubled within four quarters. The finding is the direction of the series. Whether €1.29M is a lot or a little cannot be told from the number alone. ::: ### A stage's deviation from its SLA is a duration, not an amount BPV describes a duration, not an amount. It says by what percentage the average dwell time in a stage deviates from the SLA, downwards as well. It does not say that an amount arrives later. BPV and the health band are also two different statements, and neither confirms the other. The band asks whether a deal is old for its stage. BPV asks whether a stage is slow. Dormant Opportunities are a quantity of their own as well. They ask whether an open deal changed stage, was promoted or entered the funnel during a period. ## What it cost to build the stock Beside EVL stands a second, different question: what did it cost to build this stock? That is a statement about costs already spent on leads, MQLs (marketing qualified leads) and opportunities, not about the expectation placed on the stock. This figure exists only with unit costs your company itself supplies: per lead, per MQL and per opportunity. Funnel Economics does not hold such costs itself. Where the figures are missing, there is no cost figure, and no zero either. This article therefore names no amount that an old stock “typically” costs. Such a number would depend on unit costs your company itself supplies. ## What follows from this and what does not The constellation of stable bEFV, falling rEFV and rising EVL is a reason to look closely. Three steps follow from it, in this order. 1. Check your own SLA values first. Do the two SLA values per stage still match the history of your won deals? Until they are checked, a high share of old deals describes the setting, not sales behaviour. 2. Read EVL as a series: the ratio of EVL to bEFV across several periods of one model, not a single value. 3. Look at the DELAYED and STALLED stock where it stands: per stage and opportunity type, not on average. EVL does not carry two conclusions. It is not an instruction to take deals out of the pipeline. And it does not promise that the amount comes back when the stock gets younger: EVL describes an expectation, not an effect. A related pattern compares not bEFV and rEFV but the sum of the open pipeline and rEFV: [Strategic Decoupling, when the pipeline grows and its expected value falls](https://funneleconomics.ai/resources/patterns/strategic-decoupling). How the share of the DELAYED and STALLED bands shows across the whole funnel is described in the article on [Funnel Calcification, the over-ageing of the pipeline](https://funneleconomics.ai/resources/patterns/funnel-calcification). :::merksatz Stable bEFV, falling rEFV, rising EVL: the structural expectation is unchanged, and the pattern can point at execution. What is read is the direction, not a threshold. ::: ## Where EVL comes from EVL follows the rEFV it is formed from. The dashboards of Funnel Economics Core show EVL on the basis of a simplified rEFV. The optional add-on Funnel Economics Strategist forms EVL from rEFV with measured factors per band. The two amounts therefore differ. bEFV is the same in both. Whoever looks for a deviation finds it at rEFV and EVL, not at the basis. BPV is calculated by Strategist. Which questions these quantities answer for finance leadership is described on the page [Sales Forecast for CFOs](https://funneleconomics.ai/solutions/cfo). The executive view is on the page [Revenue Forecast for CEOs](https://funneleconomics.ai/solutions/ceo), the view of sales operations on the page [Sales Pipeline Metrics for RevOps](https://funneleconomics.ai/solutions/revops). ## FAQ ### Is EVL lost revenue? No. EVL is the difference between bEFV and rEFV, that is, the gap between two expected values for the same open pipeline. An expected value is not a cash flow: money moves only when a deal is won. EVL shows how far the expectation falls once the age of the deals is priced in. EVL does not say that this amount comes back when the stock gets younger. ### At what EVL is action required? There is no fixed threshold for EVL. What is judged is the ratio of EVL to bEFV against its own history in the same model, and its direction. A statement such as “higher than in the prior periods and rising” is information; a fixed percentage is not. ### What does it mean when bEFV stays stable and rEFV falls? Then EVL rises, and that can point at execution, not at the market or the product. bEFV works only with the amounts and your own stage win rates; if it stays stable, the structural expectation of the pipeline has not changed. rEFV additionally takes the age of the deals into account. If only rEFV falls, the difference lies in that weighting. Which measured factor in rEFV accounts for the gap has to be read before the gap is attributed to the age of the deals. ### Can I see what it cost to build the stock? Only with unit costs your company itself supplies: per lead, per MQL (marketing qualified lead) and per opportunity. Funnel Economics does not hold these costs itself. Where the figures are missing, there is no cost figure, and no zero either. This figure also answers a different question from EVL: what the stock has already cost, not what it lets you expect.