Pipeline Measurements

Live from Skid Row, New York, it's SaaS Talk with the Metrics Brothers, Growth and CAC.

I'm Growth, better known as Ray Wright, founder and CEO of RevOps Squared.

And I'm CAC, also known as Dave Kellogg, independent consultant, EIR at Balderton Capital, and And the author of Kellogg.

And together, Dave, we are the Metrics Brothers.

And an unlikely pair at that, Ray. Today's episode is the 3rd in our recently launched podcast series, SaaS Talk. In episode 1, we talked about expansion ARR and expansion CAC. In episode 2, we talked about pipeline generation. What's on tap for today, Ray?

Well, some of the things I love about doing these podcasts with you, Dave, they progress. Conversation leads to the next conversation. So I thought we should talk about not pipeline generation this time, but the measurements and metrics we can use to understand the efficacy of our pipeline.

That's a great topic. It's a nice progression too. I look at when it comes to pipeline metrics, I always say the nice thing about them is that there are so many you can choose from. So Ray, given that, tell me about your favorite metrics that you think every SaaS company should track when it comes to pipeline measurement.

The Metrics Brothers is proudly sponsored by Benchmarkit, the B2B AI and software industry's largest, broadest, and most contextualized benchmarking index. Dave Kellogg and Ray Groth Wright have put the Metrics Brothers podcast on hiatus for remainder of 2026. All episodes we have ever recorded are still available on your favorite podcasting app. You can reach Dave at Kellogg and Ray on LinkedIn at Ray Reich. Thank you so much for listening to the Metrics Brothers podcast.

Hey, one of the things you know is I like to be a little long and verbose sometimes, so I don't know if I can just choose one or two. So sit back, I'm going to talk for a while because you talked a lot last podcast, and maybe after this the audience is going to realize that we truly are brothers from other mothers, if you know what I mean.

The equal time for Ray episode. Okay, go for it.

And by the way, for the listening audience, if this becomes a TL;DR moment— too long, didn't listen— We're going to blame Bill Bench because part of my orientation here is based upon his actual episode that he did on another podcast, and I really liked what he had to say. But here's what I've done traditionally. Number one, we got to start with what is the pipeline required to hit that new ARR goal in the future, whether that's next quarter, next month, next quarter plus one. And you need to understand your historic pipeline conversion rates and your pipeline conversion ratio. So you got to start there. Then you gotta kind of look at, well, what's the current pipeline that I have scheduled to close in that accounting period? Then you gotta look at the pipeline that you typically generate in period, because you're not going to be able to look at historic conversion rates there because it's going to come in and close in the same period. Then you look at historically, what percentage of my deals do I end up winning versus losing and slipping? And that's Creates your starting period pipeline goal. But I don't stop there, Dave. I like to look at it by source. How much pipeline do I need from my inbound marketing leads or my outbound SDR leads or my partner and channels leads? So I really want to look at my pipeline coverage ratio by source. And then I develop my pipeline generation or creation goals by source. Which rolls up to that overall pipeline goal. So is that too much info?

No, it's perfect. Let me actively listen though. So one, kind of do the waterfall or really the leaky bucket to figure out a starting period pipeline goal. So kind of current plus and add all the pluses and subtract all the minuses. 2, break that down by source to look at how much pipeline is covered coming by each source and then create goals by each source, knowing that different sources close at different rates.

Exactly right.

Okay, anything else?

Well, honestly, we've just done the modeling and planning of what we need, but then we got to know how we're performing against that plan, right?

Yeah, true. Now, how do we do that then? So you said we did the planning and modeling, it's a good point. Now, once we step into execution mode, what do we do?

I know this podcast is from Schenectady, but put your New York City fast ears on because I'm going to talk fast. So you need a pipeline performance dashboard that everyone involved in the pipeline management process can monitor on a daily basis. And of course, you start with what's my total pipeline's current value for that period of the close. So this quarter, this month. Then you need to also know what your pipeline current value is by source, because if you know your different sources that are generating pipeline with different conversion rates, you need to know it by source. Then you need to have a line item that says Here's a pipeline added today, this week, this month, total and by source. And then you need to have another pipeline item that's pipeline lost. It's lost due to closed won. And maybe I should say pipeline decrease because you decrease due to closed won, which is goodness, closed lost, which is not goodness. You might have no decisions. That's not goodness, but you need to know that pipeline's being Decreased because no decisions, and then pipeline slipped or pushed into the next quarter. Then you need to also look at how did opportunity-by-opportunity value changes impact the pipeline, because you might have one opportunity that increased by $50,000, but 2 others that decreased by $28,000 each. And then you get total pipeline. But what I'm really saying here, Dave, is have real-time visibility into the Ins and outs of your pipeline daily, weekly, monthly.

Absolutely. You want to be on top of those numbers. It's critically important. Ray, there was a lot in there. Uh, by the way, one aside, we need to do an episode on win-loss analysis because I want to talk about no decision. It does happen. It's an important category, but sometimes it can be used as a dumping ground. So, so let's make a note to do that. Now, at a macro level, Ray, if you only had 2 things you could look at in that pretty long list, what would they be?

You know, you always do that to me. You always try to limit me with 2, but I'm going to actually say 4, Dave. So making my own rules as I go here. But of course, you always want to know what your current pipeline value is, and based upon historic conversion rates, how's that going to result in new ARR for the quarter? Because you always want to be on top of that. But then when I go to the next level, the 2 things that's so important to me is understanding my conversion metrics. What is my qualified lead to pipeline conversion by source? Because it's going to inform future quarters and what pipeline I need. And my qualified pipeline to closed won, because if I'm slowing down this quarter or my closed won rate is lower, I may need to change what my pipeline coverage ratio and this pipeline required for next quarter is.

So that's it. You do the same thing I do, which is we try and decompose the funnel into 2 major segments, kind of high and low, let's just call them. The high is for you, you're looking at lead to pipeline conversion, and then the second one, you're looking at pipeline to close. Uh, I often look at MQL to S2 conversion and S2 close rate. Right? Because what we're trying to do is simplify what could be a wall of conversion rates, right? Because if you look at each step along that, you can generate what I call a wall of numbers, or this just giant table, you know, by month, by every step, numbers and conversions, and it just gets overwhelming. So I like what you did, even though you cheated and gave 4, not 2. I like how you're, you're trying to simplify the problem to say, look, there's kind of high funnel, which is, you know, from top of funnel to pipeline. And then there's basically, which is mostly the department of marketing, and then there's pipeline to close, which is really the department of sales. I sometimes call it, say there's a, uh, marketing is a stage 2 opportunity generation factory and sales is a stage 2 opportunity closing factory. So, hey.

I love how you simplify and you frame everything. So I'm gonna go take a sip of my decaffeinated coffee so I can slow down a little bit. And I'm going to ask you, what do you recommend to SaaS companies as far as the pipeline metrics to track? How do you do it, Dave?

Yeah, it's similar to you, um, with, with a lot of overlap. I structure it a little differently. I think about 3 things: coverage, conversion, and progression. So, and this is back to the simplification, I like to say let's give sales a chance to hit the number, and then did we hit the number? Because in some companies, we're missing the number, sales never really had a chance. If they're starting with 2x pipeline coverage or 2.4x pipeline coverage, yes, we're going to ask them to kind of perform a miracle, do the Hail Mary, you know, hit the number anyway. But we didn't really give them a chance to hit the number. So I start at the very top and say, is our problem if we're missing the number that we're giving sales a chance and they're not taking it, or that we're not giving sales a chance? And giving sales a chance is really measured by pipeline coverage. And look, we got to look at historical coverage ratios. So what have we done? I think we should be trying to improve them. The rule of thumb is 3x. I ran a company at 2.5x and we just ran with higher quality pipeline and we converted 40% of it. I've seen companies require 5x, which I think is starting to get too high. I literally even saw one company that had a 100x coverage ratio of pipeline and they still missed their number.

Right.

So it's just incredible.

I'm pretty confident that company's not still around.

Well, let's just say they got a new management team and I think they're actually doing better now. We cleaned it up. We just said there's obviously a lot of junk in here. So let's, you know, I've got a crazy idea. Let's only put real opportunities that actually have a good chance of closing in the current quarter in the pipeline, and then we can effectively measure conversion against that. So which leads to our second metric. Coverage is the first one. The second is conversion. I measure this in the enterprise with what I call week 3 quarter pipeline conversion rate, i.e., we look at the quarterly pipeline for this quarter in week 3, and we put that on the bottom and we put the new ARR we got in the quarter on the top. And that's a ratio. It's effectively an extraction rate or a conversion rate of how much of the week 3 pipeline we convert into business. I don't do this on a deal-by-deal basis. You know, sales managers do. Because they're going to go back to reps and say, why did you have, you know, the Acme deal in the pipeline in week 3 when it didn't close? And that's a great question for a sales manager. But if I'm doing kind of macro-level forecasting, I care less about that on the theory of offsetting errors. I assume there are always going to be some of those in there, and it's really sales's problem to keep that clean and hopefully keep their management practices consistent so I can use my numbers for forecasting. The reason I picked week 3 is there's a tension between what I call kind of clean up versus freak out. Like, you know, I want to freak out early in the quarter so I can do something about it and go, oh my gosh, we only have 2.2x pipeline coverage. But I also need to give sales time to clean up after the end of the last quarter, because if you start doing analytics off, you know, the week 1 pipeline in enterprise, you're going to hear, oh, well, the pipeline was dirty and all that deal was in the wrong place and the value was wrong. And I eventually got fed up of hearing that and said, look, by week 3, clean it up. You have 2 weeks, you know, you have a week to go celebrate after the great quarter. You have another week to clean up the pipeline. But on day 1 of week 3, I'm anchoring all my quarterly analytics on that pipeline, and you need to get it cleaned up by then. So that's why I use week 3. So I have time to ensure it's clean, time to hold sales accountable for cleaning it. Now, the last thing I look at is progression. Which is to look at how the pipeline progresses over time. I did a blog post on this. It's hard to describe as a table on a podcast, but I will do my best. We take a snapshot every quarter, that those are the rows, and in the columns you put current quarter pipeline, next quarter pipeline, next quarter plus 1, all remaining quarters, then total pipeline. So I can see the whole thing. Now there's nowhere to hide. I can't push stuff out and have it disappear. So I get the whole pipeline and every quarter I can see how it flows. And once you build that chart, you actually watch stuff move along the diagonals because obviously this quarter's current pipeline was last quarter's next quarter pipeline. The quarter before that, it was the N+2 pipeline, right? So I can watch it evolve and see problems early, which is really the point of this. So take a look at the Kellogg post on that. But those are my 3 things, right? Coverage, conversion, and progression.

I'm going to ask a question because I love that table. I was visualizing it. I love visualizing tables because Excel is how I think. Is there a third dimension there, Dave? And that is by source. Don't you need to know all that by source of pipeline? Because your mix of pipeline is going to impact your coverage ratio.

You do. You know, I like to try and keep things simple, and I always like to start at the tippy top. But yes, those are all aggregates, and that all works as long as nothing changes, right? Let's just say we change sources. We add a new pipeline source out of nowhere— partners. Partner pipeline typically converts at a pretty high rate in my mind. That's going to affect our blended rate, right? The mix is going to affect the blended rate. So yes, you need to look at this stuff at the next level, but I kind of view that as sales management QBR and sales ops territory. I tend to anchor my thinking in the CEO's QBR and the CEO's territory. So let's start at the top and look at it, and if we see unusual things, yes, the CRO and the sales ops person Should be able to say, hey, what's going on here is we have a mixed change, right? You know, economists use the term ceteris paribus, all other things being equal, right? So all other things being equal, this is meaningful. Now let's talk about what's not equal. What changed? Hey, we've got a new source. Outbound is typically a very low conversion rate source in my experience. You kind of drag— it can be very good when they hit, but the conversion rates can be low. So that's going to pull down our blended rate. Right, so we need to know about these underlying changes. The question to me is just, is it kind of CEO QBR or sales QBR material?

Love that framing. Now, talking about change, you and I both grew up in enterprise-class companies, and we talked about 6-month, 9-month, 12-month sales cycles. But now we have so many SMB solutions, less than $10K ACV, sales cycles of 30 days. Does your pipeline kind of management framework change for lower value, faster moving deal cycles?

You know, it does, Ray. This was a tough adaptation for me, maybe as hard as on-premises to SaaS, going from kind of annual SaaS to monthly SaaS, because these, these monthly SaaS businesses tend to have very fast sales cycles. And I've been fortunate enough to work with some in the last year or two. And yes, it's different. Like, for example, week 3 quarterly pipeline coverage means a lot in enterprise. where the deal cycles are 9 months, it doesn't mean much in velocity. I'm just going to call it, right? If you have a $20K or a $10K deal size in a 30 to 45 day sales cycle, it doesn't mean much because a lot of the pipeline you're going to close this quarter hasn't been generated yet. So you can't look at coverage on the quarter. You can, however, look at coverage on the month, right? We can say, hey, wait a minute, let's map this. Let's map this really good idea, this concept called pipeline coverage And it was kind of created for me, at least in enterprise. Let's map it now to velocity or SMB. And in velocity, I look at day 3 monthly pipeline coverage because all the same principles apply, right? With a 45-day sales cycle, it's unlikely we're going to generate pipeline that closes in the month. So therefore, coverage is a meaningful ratio. And I want to start every month with 3x coverage of the monthly number, just like I want to start in enterprise every quarter with 3x coverage Of the quarterly number.

Now, one of the things that's interesting in the enterprise cycle, I spend a lot of time getting my team to talk to each sales rep, understanding why they're having a slower conversion rate or they don't have enough pipeline because every rep's a little bit different and you have time to course correct that. But in 30, 45-day sales cycles, if you know you've got a pipeline issue going into that period, into that month or into that quarter, Is there anything you can do to kind of overcome those obstacles quickly, Dave, in a short cycle timeframe?

You know, it's hard, Ray. It's just, it's really to me the same question as if you're starting an enterprise model with low quarterly pipeline. It's always the same question. You know, how do you generate pipeline in a hurry? And I actually wrote a blog post on that. And it's a real-life problem, right? Because I hate marketers who say, oh, we've only got 2.2x coverage, nothing we can do about it because there's a 9-month sales cycle. The answer is like, wait a minute, pal. 9 months is the average of the distribution. There's actually a distribution. Some deals close fast, like one company I ran, the SMB deals close fast. Expansion deals close fast, right? Some deals can get pulled forward. So it's not just about closing them fast, it's about what we can pull forward. So I think marketers should always be of the mentality that I can help, and we should never take what I call the Titanic attitude. Oh, there's the iceberg. We can't change this. You know, we can't change course. Too bad, we're gonna hit it. You know, that's the wrong way to do things. So yes, it's harder on a monthly model than a quarterly model. Planning matters more because you're really relying on the plan more, right? Because quarterly you can tell, right? If it's a 9-month sales cycle, I can know I'm in trouble a long way away. So everything just happens faster. So the cadence really needs to run monthly in my mind, and you need to be good at planning because we're relying, you know, on January 1st, we're relying on the marketing plan to go generate the pipeline in February that will close in March. It's interesting.

I do something a little bit different with my sales reps also when they're in short cycle. Like, we're looking at the pipeline going into each month and we're like, you know, for you to actually hit next month's pipeline, we're going to need 20% more well-qualified pipeline. We need to allocate 2 hours of your day to self-generated pipeline. So one of the things that I've done to overcome that, those short-term obstacles, is have bandwidth allocated by both my direct sales And even additional bandwidth from the SDRs to do outbound demand generation. What do you think about that?

Well, this is where, you know, you can tell we have different backgrounds, right? We both care about the same things, but you grew up in sales and I grew up in marketing, and you're looking very much like what I think typical sales managers do is they look rep by rep. It's not, hey, what's the aggregate forecast, but what's Larry do? I would say there's Ollie Optimist and Sally Sandbag, and right, and you're looking rep by rep. who puts their deals in too little and then expands them, who puts them in, in an out quarter and pulls them in, right? And you're— and the good news is the AI-based forecasting systems can notice these patterns, and sales managers need to look at those things. I, as marketing person trying to do the macro, go back to more ceteris paribus mode, which is, hey, if none of that's changed, if Ollie's still an optimist and Sally's still a sandbagger, and we have the same mix of Ollies and Sallys, Then the macro forecast should still work, right? So, but it's not to say right versus wrong, but it's just to say we have different jobs to do. I'm trying to get the macro forecast. You're trying to modify rep behavior, which, by the way, if you modify it too much, will actually break my forecasting.

Well, you don't have to generate as much pipeline, Dave, if we do a good job. And that's why I use something called RAMP, which is Revenue Acceleration Management Program. But I want a frontline sales manager to know exactly what Susie's tendencies are as far as pushing deals out, moving them 4 different times from the original close date, because that way you can manage your entire pipeline requirement, understanding the 5 reps in your, in your region or your territory. I think it's very important.

Awesome. I do too. So, Ray, do we have time for one more question? Are we almost at the end of our episode?

I think we need to wrap up something we talked about last time, and you said You think the chief marketing officer needs to be the quarterback of the pipeline. Can you just share exactly what that means, not only from the generation and management of the pipeline, but the measurements of the pipeline?

Sure. Look, as a former CEO, in this case, the problem with the pipeline is nobody owns it, right? Because marketing owns inbound, sales owns AE outbound, sales typically owns SDR outbound, Alliances often not reporting to sales, owns partners. You may have an ABM team that owns ABM, a growth team that owns trials, right? So there's no one person, the CEO, you can look at and say you're accountable for 3x pipeline coverage, right? So because of that, I have 2 rules that I come up with. So, so you have to apply some mix and say, okay, I want marketing to own 65 and the AE outbound to be 15 and SDR outbound to be 15 and the rest to be partners, right? So you make some mix, which is important. One trick is to overallocate that mix. Let's go generate 110% of the pipeline we need. If you can afford to do it, it's great, right? Belt and suspenders. But don't goal people on the mix. Goal people on the, on the absolute numbers, right? Because I don't want marketing generating 65% of a pipeline that's half as big as it's supposed to be and then celebrating, right? I want to say no, marketing was on the hook to generate— to say we needed 1,000 opties, 650 opties— and did we get those opties or not? I don't care if you got 65% and we only generated, you know, 500 opt-ins. So that's the first thing, don't go all on mix. And then the second thing is that somebody, despite this mix, has to own overseeing the whole thing. And I call that the quarterback role. And I think it's a great opportunity for the CMO to step up and say, I'm going to own that because nobody else does. The CEO can't or shouldn't own it. So what does that ownership mean? It means I'm going to forecast it. And I'm going to be accountable for raising issues when I see them in the forecast. And most importantly, if I'm forecasting a next quarter starting pipeline deficit, I'm going to tell the CEO, I'm going to ring the alarm bell and call a meeting of all the various pipeline sources and say, how are we going to close this? And I'm going to come back to the next weekly staff meeting and saying, here's the problem, here's what we're doing about it. So that's what I mean by quarterbacking it. I don't have to own the, you know, the SDR outbound or sales outbound. to quarterback this and say, I see a problem and I have taken charge or I've taken leadership on trying to get it solved.

I love it. It's like the coordinator. You can't do everyone's job, but you can definitely put into place for success. Well, unfortunately, Dave, 20 minutes is already up, but I found a topic from this discussion that every CFO and CEO out there listening is going to want to come back and listen to us on the next episode. And that is, how do you measure the efficacy, the economic efficacy of this pipeline generation? Is it cost per lead? Is it cost per dollar of pipeline? What do you think about doing a whole episode on that next week?

Yeah, should we measure cost of return? I mean, look, marketers get asked these questions all the time. CFOs ask these questions all the time. I think an episode on basically pipeline ROI and pipeline costing is a great, great topic.

Okay, locked and loaded for next week. Dave, as always, thank you so much for being my co-host this week.

Thank you, Brother Ray. See you next time.

All right, and to our listeners in the audience, if you enjoy this back and forth with Dave Kellogg and Ray Reich, and, you know, I should say from CAC and from Growth, it would mean the world to us. Go ahead and subscribe to SaaS Talk on your favorite podcast network. Go ahead and give us that 5-star rating, not because Dave and I really need it and we feel undervalued if you don't, but it really amplifies the distribution of the podcast. to your industry colleagues and peers with that 5-star rating. Dave, thank you so much for your time this week.

Great. Thank you. One last thing. We have an email now too, right, where they can send in questions or feedback? I can't remember the address. Where can folks reach us, right?

Well, why don't you just send an email to sastalkpodcast@gmail.com? sastalkpodcast@gmail.com.

Thanks a lot.

Hey, thank you, everyone. The Metrics Brothers AI, SaaS, and More is a production of The Metrics Brothers Growth and CAC. And a member of the Benchmarket Podcast Network. By accessing this podcast, you acknowledge that the Metrics Brothers make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided or the humor content of the jokes told. Ray, information, opinions, and recommendations presented are, according to our spouses, probably wrong and provided for information purposes only. This podcast should not be considered professional or, for that matter, unprofessional advice. We disclaim any and all liability for any direct, indirect, indirect, misdirect, incidental, special, ordinary, consequential, inconsequential, or other damages arising out of any use of, or God help you, reliance upon the information presented here. Ray Grothreich is based in New York City and available on X @rayreich. Dave Kellogg is based in Silicon Valley and available on X @kelblog. Schedectady, which is French for unspellable, is not our actual production location. Thanks for listening.