SaaS Pipeline Coverage

Pipeline coverage is one of the most important things you need to hit revenue targets in SaaS. If you’re facing growth challenges, lack of pipeline is usually the #1 problem.

Without enough leads progressing through your sales funnel, reaching your revenue goals becomes impossible. Nothing accelerates growth like a robust pipeline.

So here’s the big question. Do you have a pipeline issue?

In this week’s article, I’ll walk you through what pipeline coverage is, how to calculate it, and how to execute a strategy to hit that number.

What is Pipeline Coverage?

Pipeline coverage is a key metric that shows how many sales opportunities you have in your funnel compared to your revenue targets. It’s the ratio between the total value of your potential deals and your sales goals. This ratio helps you understand if you have enough pipeline to reach your revenue objectives.

If you’re struggling to grow, it’s likely that your pipeline coverage is falling short, and your team may not be fully aligned

Here are the steps to follow to get into the Pipeline Coverage discipline.

Principle 1: Calculate your Pipeline Coverage

To hit your revenue targets, you need to fully understand your pipeline coverage. This means knowing exactly how many opportunities you need in your pipeline to meet your goals. Understanding the math behind pipeline coverage can help you regularly track and evaluate your progress.

The rule of thumb in SaaS is that in order to generate $1M in net-new ARR, you need 3-5X pipeline coverage. Why? If you aim for $1M in net-new revenue and win 20% of your opportunities on average, you need $5M worth of opportunities in your pipeline. Additionally, if it takes you three months on average to close deals, you will need to have built that pipeline three months ago to close them this month.

Principle 2: Align your GTM Strategy

Once you have a grasp on how to calculate your pipeline coverage, the next step is to align your Go-To-Market strategy to hit your pipeline targets. This involves several key actions:

- Developing an Ideal Customer Profile (ICP)

- Creating a compelling Strategic Narrative (or what I call – a Manifesto)

- Lastly, delivering your message across key channels to attract your ICP

Your Go-To-Market strategy needs to be in place so you can start generating the necessary leads and opportunities to hit your pipeline and revenue numbers. If you’re a SaaS Founder and you don’t quite yet have a defined GTM machine, grab a complimentary copy of my 5-Point SaaS Growth Strategy Guide to learn how.?

Usually, you’ll divide a “Pipeline Commit” number among Marketing, Partners, and Sales Development. By aligning your GTM team to work together, you’ll have a solid chance of achieving that 5X pipeline coverage.

Principle 3: Calculate your Activation Rate

How can you tell if you’re on track?

I recommend measuring “Activation Rate” for any new activities. For example, if marketing generates 1,000 leads… How many of those leads actually booked a call or became sales-generated opportunities? If sales devs booked 10 demos, how many of those are qualified opportunities and moving on to the next step?

This “Activation Rate” is an early warning signal indicating whether your pipeline generation activities are producing quality leads (or garbage). By tracking this number, you can hold your team accountable and ensure that you’re effectively reaching your target audience.

In Conclusion

Knowing your pipeline coverage number and the math behind it enables you to identify the gaps in your go-to-market strategy and take action to fill them. By focusing on building a strong pipeline and hitting your pipeline coverage number, you'll be able to unlock the growth you've been searching for.

What do you do to reach your pipeline targets?

TK was CEO & Founder at ToutApp (backed by a16z, Jackson Square Ventures and prominent angel investors in Silicon Valley). After scaling ToutApp, it was acquired by Marketo where TK went on to join Marketo's executive team and serve as their Senior Vice President of Strategy. After running a 2-year transformation as part of the executive team, Marketo was acquired by Adobe for $4.75bn.?

TK now spends his time as a Strategic Advisor to 300+ B2B SaaS Founders globally. As the Founder of Unstoppable, he helps other SaaS Founders grow their startups faster through his Weekly Youtube videos and his application-only SaaS Go-To-Market Program.?

Want to learn more about building a proper GTM strategy for your SaaS business? Grab a complimentary copy of my 5-Point SaaS Growth Strategy Guide here.