Pipeline
PIPE-line
The total dollar value of deals your sales team is actively working. The most important leading indicator in any sales organization.
Pipeline is the total dollar value of deals your sales team is working on. If a salesperson is talking to five companies about potential $100k contracts, that is $500k in pipeline. Pipeline is potential, not money in the bank. But it is the most important leading indicator in any sales organization. Without pipeline, there is nothing to close.
The ratio of pipeline to quota tells you whether the sales team has enough at-bats. Most companies want 3x or 4x pipeline coverage. If your quarterly quota is $1M, you want $3M to $4M in pipeline to feel confident you will hit the number. Deals fall through. Timelines slip. You need cushion.
When pipeline is down, the diagnostic question is: is that a lead generation problem or a conversion problem? If you have plenty of leads but they are not converting to qualified opportunities, that is a sales problem. If you do not have enough leads entering the funnel, that is a marketing problem. The vocabulary gives you the tools to find the root cause.
Examples
A quarterly pipeline review.
The team has $4.2M in pipeline against a $1.2M quota. That is 3.5x coverage. The VP of Sales says they feel good about hitting the number.
A startup with thin pipeline.
You have $800k in pipeline against a $500k quota. That is 1.6x coverage. With a typical 25% win rate, you will close around $200k. You are going to miss by a mile.
Developer-sourced pipeline.
A developer tried your product, loved it, and introduced you to their VP of Engineering. That deal enters pipeline at $200k. Developer-sourced pipeline is usually higher quality because the developer already understands and believes in the product.
In practice
Read more on the blog
Related terms
The ratio of total pipeline value to quota. Tells you whether you have enough opportunities to hit your number.
A signed deal. The total value of a customer contract at the time they commit to buy. Not the same as revenue.
The percentage of pipeline that converts to closed deals. If you have $1M in pipeline and close $250k, your win rate is 25%.
The average time from first contact with a prospect to closed-won deal. Longer for enterprise, shorter for self-serve.
A person or company that has shown interest in your product. The starting point of every sales pipeline.
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