What Coverage Ratio Measures

Pipeline coverage ratio is the total value of pipeline divided by the revenue target for a given period. If your quarterly target is $1M and your pipeline contains $3.2M in qualified opportunities, your coverage ratio is 3.2x. The ratio answers the question: do we have enough pipeline to hit the target, given that not every deal will close? A ratio of 1x means you need to close every deal. A ratio of 3x means you can lose two-thirds of your pipeline and still hit target.

Coverage Ratio = Total Qualified Pipeline Value / Revenue Target

Example:
  Revenue Target: $1,000,000
  Pipeline Value:  $3,200,000
  Coverage Ratio:  3.2x

Required Coverage = 1 / Win Rate
  If Win Rate = 25%, Required Coverage = 1 / 0.25 = 4.0x
  If Win Rate = 33%, Required Coverage = 1 / 0.33 = 3.0x
  If Win Rate = 50%, Required Coverage = 1 / 0.50 = 2.0x

Your Required Coverage = 1 / Your Historical Win Rate
NOT the industry benchmark of "3x" which assumes a 33% win rate.