Should You Increase Your Pipeline from 3-5X?

Every sales organization wants to maintain healthy pipeline coverage, so increasing coverage from 3-5X might seem like an obvious strategy. But is it right for every company? Is the highest coverage ratio possible always the best way to achieve sales goals?

Spoiler: It’s not. There are undoubted benefits to high pipeline coverage, including predictable revenue and easier forecasting. But there are also pitfalls to watch out for—too-high coverage can mask larger issues that you need to know about and fix.

In this guide, we’ll explore what you need to know about pipeline coverage ratios and how to maintain the right one for your business.

Quick Takeaways

• High pipeline coverage provides a safety net in the case expected deals don’t convert during a specific time period. 3X coverage is generally considered healthy.
• Benefits of high pipeline coverage include lower risk, revenue predictability, easier forecasting, competitive advantages, and scalability.
• The drawback of increasing your pipeline to 5X is that it can mask underlying issues with your sales process, including poor targeting or ineffective marketing and sales.
• The right pipeline coverage ratio for your business depends on factors such as product and industry, demand consistency, and length of sales cycle.

Why Do Companies Increase Sales Pipeline Coverage?

High pipeline coverage is like a sales safety net—when you’ve got several times more potential deals in your pipeline than you need to make quota, your sales team doesn’t feel as pressed to convert every deal or panicked when an opportunity falls through.

By industry standard, a healthy pipeline coverage ratio is approximately 3:1—3 opportunities in the pipeline for every sale you need to convert.

In some cases, companies aim to boost that ratio and reach 4X, 5X (or even higher) coverage for a certain period of time. There are a few common reasons behind this goal:

• Risk Mitigation — A larger, diversified pipeline lowers the risk associated with dependence on a fewer amount of deals.
• Revenue Predictability — Higher pipeline coverage can stabilize revenue inflow, an especially important metric for companies with fluctuating or seasonal demand.
• Sales Forecasting — Higher pipeline coverage allows companies to forecast with more confidence that they can meet quotas.
• Competitive Advantage — With higher pipeline coverage, companies can focus on the highest potential deals to achieve higher conversion rates and win business over competitors.
• Scalability — A larger pool of potential customers and predictable revenue allows companies to scale their operations more seamlessly.

The Drawback: Sales Pipeline Coverage as a Cover-Up

While the benefits of high sales pipeline coverage seem obvious, there can also be pitfalls that come with inflating your pipeline to be larger than it needs to be. An inflated pipeline can create a false sense of security and dilute the quality standards you maintain for new leads.

Too-high pipeline coverage can also mask larger business risks that exist at your company, ones that can snowball over time if not addressed. These include:

• Low-Quality Opportunities — If you’re unable to consistently convert a third of the opportunities in your pipeline, you’re probably generating poor leads.
• Poor Conversion Strategy — Conversely, if your leads are high-quality but not converting at the expected rate, you could have a sales issue that needs to be addressed.
• Inaccurate Audience Targeting — If your pipeline is scrubbed (i.e. you know opportunities meet quality standards) and your sales process is strong, but you’re still not winning leads, there is a chance you could simply be targeting the wrong ideal customer profiles and personas.
• Marketing Issues — Low-quality leads and/or inability to convert could mean marketing isn’t doing an effective job reaching your target audience.
• Ineffective Lead Nurturing — If leads are falling off at a high rate, you may need to improve your nurturing efforts to keep them engaged.

The risk of overly high pipeline coverage (generally about 3-3.5X coverage) is that you may not recognize the above issues if they’re being hidden by met quotas. Over time, that means missed opportunities, sales, and revenue that could impede business growth, as you can see from the “What if?” scenarios outlined below.

Getting the Right Ratio for Your Business

So what’s the right ratio for your business? Like most things in business, the exact right ratio depends on a number of factors unique to your company. Some organizations and industries require higher pipeline coverage, while in other cases businesses can (and should) stick to a quality-over-quantity approach.

As you work to determine the right pipeline coverage ratio for your company, consider the following factors:

• Your Product and Customer — The nature of your offerings and the type of customers you serve can impact typical conversion rates.
• Seasonality and Demand — If demand for your product is seasonal and/or fluctuates heavily depending on outside factors, you probably need higher pipeline coverage.
• Length of Sales Cycle — Shorter and efficient sales cycles need lower coverage, while longer cycles need higher coverage to reliably meet quotas.

There are sales best practices you can use to keep your sales pipeline healthy and ensure your coverage is reliable, including:

• Implementing specific actions for sales reps to complete, like meeting with 2-3 prospects per week and/or attending a certain number of industry events
• Define your ideal pipeline coverage ratio and track it closely to understand trends and opportunities for improvement
• Partner closely with your marketing team around pipeline-building activities and strong qualification processes
• Train your sales reps effectively on executing lead nurturing activities

By making pipeline coverage an ongoing priority, you can maintain a healthy ratio and a strong understanding of pipeline activity to drive sales goal achievement and predictable revenue.

How Televerde Can Help

Achieving healthy pipeline coverage requires a marketing and sales team robust enough to execute your strategy at scale. If you don’t have all the resources you need in-house, you’re not alone—it’s why many companies outsource their marketing and sales efforts.

Televerde has been providing outsourced sales, marketing and customer experience services to industry-leading companies across different industries for 30 years.

Contact our team today to learn how our solutions can help you grow your business.