The 2x Pipeline Coverage Challenge

A VP of Sales was complaining to me last week about his pipeline coverage ratio. He was worried that it wasn’t enough.

He’d given his sellers the mandate to have 5 times the amount of their monthly target in their pipeline at any time. A 5x pipeline coverage ratio. And he was thinking of making it 7x.

His team was closing just 1 out of every 5 of their most qualified opportunities. Therefore they needed 5x their monthly number in their pipeline.

A 20% close rate is, objectively speaking, not very good. Something's broken in your process if that’s what you consider acceptable.

Imagine how superficial and inadequate your discovery and qualification must be if you are so mismatched with your most highly qualified opportunities that you can close only 1 out of every 5.

Unfortunately this VP of Sales had no idea which was the chicken and which was the egg.

Did he have a 5x pipeline coverage requirement because his team could close only 1 out of 5 qualified opportunities?

Or, was his team closing only 1 out of 5 opportunities because of all the selling time they were wasting with badly qualified prospects clogging his pipeline due the 5x requirement?

Whatever the precipitating factors are, high pipeline coverage ratios (and low close rates) mean that a seller is spending a significant chunk of his/her sales time working with prospects that never intend to buy, let alone buy from him/her.

Why do you have to kiss five frogs to find one prince?

I've built sales teams at successful high-growth start-ups and never approached these coverage ratios.

They are an artifact of how you choose to sell. Not how you have to sell.

So, here’s my thought exercise for sales leaders...

What would you do if your boss told you that starting next month your pipeline coverage ratio could never exceed 2x of your monthly target?

You still had to hit your monthly quota. However, your pipeline coverage could never exceed 2x of that number.

What would you have to change in your current processes and people to make that happen?

How would your sellers have to change their sales skills and behaviors in order to improve their close rate to hit their number?

How would you have to change your new biz development process? (Don’t tell me that you’re dependent on the quality of the leads you get from marketing. You’re in sales. If you don’t like the leads you get from marketing, go find your own good prospects. That’s what sellers do.)

How would you change your discovery and qualification processes to make them more effective to quickly weed out non-buyers?

What impact would this have on the type of sales candidate you hire and how you train them?

Just imagine how much more productive your sellers could be if they weren’t wasting time dealing with prospects that weren’t buyers.

My experience has always been that tighter pipeline management leads to faster sales growth.

Inflated pipeline coverage ratios are just a bad habit you’ve gotten into. They have nothing to do with what’s possible.

This is a sales management challenge. As well as a system, process, behaviors and skills challenge.

I’m sure you can figure it out.

What would you do?

- Andy Paul