Pipeline Coverage: The Secret to Increasing SaaS Revenue and Closing More Deals

- If you're looking to drive growth for your SaaS business,
you're having these moments where you're like, look,
we're doing all these things
and we should be going faster,
we should be growing more.
It's almost as if you're doing all these things,
but there's this invisible hand just holding back
the growth of your SaaS business.
I've been there as a founder.
And in this episode I'm gonna walk you through
this one equation I use.
It's called a pipeline coverage equation.
I'm gonna walk you through how to actually implement
this equation in your business
so that you can figure out exactly
what that invisible hand is, what's holding you back.
And once you implement this equation in your business,
you will be able to accelerate your path
to that next stage of growth.
Intro.
(intro music)
What's everybody? Welcome to Unstoppable.
I'm TK and on this channel,
I hope SaaS founders like you grow your SaaS businesses
faster with an unstoppable strategy.
Now, if you're new to this channel, welcome.
I drop an episode every single Sunday
with actionable strategies
and tactics from the trenches
on how to grow your SaaS business faster.
So be sure to hit that subscribe button and that bail icon.
That way you'll get notified every single time
I drop an episode with the TK energy.
Now, if you're already part of this community,
if you're part of my SaaS Go-To-Market coaching programs,
my people welcome back.
It's really awesome to see you over here.
There's a saying we have in SaaS
and really in any sort of B2B business, pipeline cures all.
What that means is if your wind rates are suffering,
get more pipeline.
If you are in a competitive market,
get more pipeline.
If you are not hitting your numbers
or you're trying to ramp salespeople, get more pipeline.
The more pipeline you have, the more opportunities you have,
the more customer conversations you're having.
The more customer conversations you're having,
the more data you're collecting.
The more data you're collecting,
the more you're going to be able to pivot your business
to unlock that growth.
But here's the big question.
How much pipeline is enough pipeline?
This is one of the biggest things that I struggle with
as a founder.
In my last SaaS company, ToutApp,
I worked with my CRO, Frank Swain, amazing guy,
wore a three piece suit to work every day
and after every sales call, he asked his reps,
did you send the PO?
Which was purchase order?
I had to look that up when we first started
working together.
But he taught me the importance of pipeline coverage.
And in this episode,
I'm gonna walk you through the exact secret, not so secret,
but often not used equation
that I use for any SaaS business I operate,
or any SaaS business that I coach right now
to figure out how much pipeline you need,
what that pipeline coverage should be
and what's holding you back.
So if you're excited to dig into the three key principles
and how to incorporate this pipeline coverage formula,
so you can unlock your growth,
go ahead and smash out like button
for the YouTube algorithm.
It just loves it when you do that.
And let's dig right into it.
So principle number one in this equation
that I'm gonna walk you through,
and by the end of this episode I'm gonna show you
exactly what to do with this equation
to unlock your growth, is figuring out your target number.
So every company has a target number.
Let's just take for example how much business
you want to book in the next month, all right?
So let's just say in the next month,
I want to book a 100 k of net new business.
This is not renewals, this is not cross sells,
this is not existing customers,
like, I wanna get a 100 k of net new business
that I'm adding to my MRR.
Let's just say you wanna do that.
So that's the first piece you wanna do.
A lot of times founders go around and saying,
especially in the early stage, you're like,
let's just grow as fast as possible.
Let's do all the things.
Let's paint the town blue so that everyone knows about us
and we'll close as much business as possible.
And that's okay when you're starting out.
But as you start to get some movement going,
it's really important to set a target.
And that's the first piece of this equation.
Once you have a target,
the second thing you wanna do in this equation
is plug in your win rate.
Every SaaS business has a certain win rate.
If you're product lead, that's your conversion rate.
That's how many qualified people are starting a trial
and converting to paid.
If you're sales driven,
then it's how many quality opportunities are being booked
and getting on a call with your sales reps
or yourself if you're at that founder lead stage.
And the win rate is how many of those opportunities
or trials are converting to real revenue.
Now, you should look this up.
You should look at how many opportunities we had
or how many trials we've started,
and out of that how much converted to revenue.
And that's essentially your win rate
or conversion rate, depending on how you wanna look at it.
Average win rate for SaaS companies,
especially in the early stages,
even in the latest stages is 20%.
This is not a random number.
It essentially is Pareto's principle of the 80/20.
20% of the opportunities you create
or the users that sign up,
or the calls that you're having are going to become
real customers.
The rest may not buy now, but they'll buy later.
Now, if you're getting a lot of warm inbound calls,
inbound leads and you're really nurturing them,
you have a robust go to market strategy,
I've seen this win rate go up to 53%.
If you're doing outbound where you're going in cold
and trying to bring 'em on a call,
then it kind of ends up being 15 to 20%.
But looking at this blended win rate
will help you understand this part of the equation
where what's our average win rate?
In this particular case,
let's just say we wanna do a 100 K of new business
and we win 20% of the deals that we actually talk to.
Actual users starting the trial,
or in a sales lead case, actual customers,
potential customers that are coming on a prospecting call
or a discovery call or a demo call.
Once you have these two pieces,
you essentially get this number right here,
which is what's called your pipeline coverage number.
So this is called pipeline coverage number.
Now different people may call it slightly differently.
Even the word pipeline coverage is a really OG word,
just like purchase order.
And you may call it slightly different things,
but if you divide a 100 K by 20%,
you essentially get 500 K.
What that means is very simple out of the 500 K
worth of pipeline that your marketing team
or your outbound team or you,
if you're just founder lead right now,
any one of these cases apply, generate,
you're going to win 20% of that
or whatever your win rate is.
And then outta that 20% is gonna be essentially
your 100 K of net new business.
This alone is the type of thing that a lot of founders
and a lot of go-to-market leaders don't think about
on a regular basis.
This is why I call it my secret,
but not so secret formula
because this is not groundbreaking.
However, this is the single invisible hand
that holds back the growth of SaaS companies.
Your salespeople might be great,
you might be great at sales,
you may be doing enough marketing
and really educating the buyers
and getting them to show up on calls.
Your product may be amazing,
and your customers are so happy
and your churn is healthy,
however, if you don't generate at least 500 K of pipeline,
quality pipeline, and you don't win at least 20% of that,
you don't stand a chance at hitting that a 100 K number.
And so a lot of times, and this has happened to baby TK,
this has happened to me where we're like, I don't get it.
We should be going faster.
We have a great product, we have great costumers.
Why are we not growing faster?
And and then you go look at your salespeople
or you look at your marketing steps,
and you're looking at all these things
and you're reevaluating your own sales calls,
you just don't know what it is.
Usually it's just mathematics.
Mathematically, you cannot hit this target number
unless you really figure out a way to generate
this much pipeline.
Now, there are a couple of different things
that you can do with this.
You can try to figure out,
well why don't we just win more?
Let's get 50% more of a win rate.
You could do that,
but then you're going up against the laws of physics.
Can you do that? Absolutely, I have seen that.
But in the early stages it can be really hard.
The easier thing, believe it or not,
relatively speaking,
or the more probabilistically possible thing,
if that's a word.
But the thing that's gonna really move the needle for you
is to figure out ways of getting more pipeline.
Going back to what I said originally,
if you get more pipeline,
you get into more customer conversations,
you get into more customer conversations, you learn more,
you get more data, you see what works,
you tweak your process, you get more at bats,
and that allows you to improve the overall process
and drive up this win rate
In a vacuum, if you've just got two deals
and you lost both of them,
your problem isn't that you have a 0% win rate,
your problem is you only had two deals.
And that's where this equation really comes in.
Now this actually breaks down into some additional things
because you might be wonder, okay, TK, great,
we don't have enough pipeline, we need more pipeline.
What do we do with this?
So this is where the rest of this equation really comes in.
And this part I think is a little bit more secret.
Really not enough people do this.
Now, before I go into the rest of these pieces
on how you actually take action on this,
once you figure out your math around this,
lemme just pause here for a second.
Are you starting to see the power in this?
Are you starting to see the power of this simple equation
where you can just figure out what's my target?
What's my win-win? How much pipeline do I need?
Am I hitting that pipeline number or am I not?
Chances are nine times out of 10,
you are not hitting that pipeline number,
and that is the invisible hand that's holding you back.
It's not your fault,
it's not your product's fault, it's not your market's fault.
It's literally the fault of math.
Blame math for it.
But that's what you need to hit.
If you're starting to see the power in this,
can I just get a yes in the comments below?
You can also smash a like button for the YouTube algorithm.
It just loves it when you do that.
Also, if you're in the stage where you're looking to drive
growth for your SaaS business
and you're trying to figure out,
well, how do I generate enough pipeline?
How do I actually mobilize my team and align my team?
Maybe I need to hire some people.
Maybe I need to get into it
and really embrace the founder lead journey.
This is exactly why I created my SaaS
Go-To-Market coaching program.
I'll tell you more about it at the end of this episode.
You don't have to go anywhere right now.
I'll also link to it below.
But right now, let's talk about what you actually do
with this number, this 500 K number
that's staring at your face.
Also smash that like button for the YouTube algorithm,
it just loves it when you do that.
And between you and me, so do we,
we just put a lot of love into these videos
and we love it when you do that.
Okay, so once you have this number,
it's a big number and it's a scary number.
So one of the biggest things I do when I'm coaching founders
is I tell them, okay, let's make this more tangible.
Let's make this more real.
So the next thing that we do is we take your average
contract value, ACV.
ACV could also be your average deal size
or average price a customer pays when they buy your product.
So in this scenario, let's just say our ACV is 10 K,
which means that each customer that I convert,
I'm gonna get 10 K of revenue. So I need 500 K of pipeline.
Now, 500 K is a large number
and a lot of people don't know how to think about it.
But if I divide the 500 K with my average contract value,
I essentially get 50.
And that's a lot easier to understand.
What that means is I need 50 quality opportunities.
You see how that's a lot better?
I need to go after 50 quality opportunities,
50 target customers,
50 people that are in my ideal customer profile,
and I need to figure out how to go after these 50 people.
And if I can engage with them, get them to come on a demo,
get them to trial the product, get them on a sales call,
then I can win 20% of those
and I can generate my a 100 K of net new business target.
Are we starting to see the power in this?
500 K can be almost like, oh my God,
how are we ever gonna do that?
What are we gonna do?
But if you break it down,
divide by ACV, you get 50 opportunities,
that's your target.
That becomes a lot more tangible.
And all of a sudden that invisible hand dissipates.
Now you're like, cool,
what do we need to do to generate 50 new opportunities?
And really another way to say that is
how do we start conversations with 50 people
in our ideal customer profile,
the ideal customers that would buy from us?
And this is where the power of this equation
really comes in.
Because half of this equation is just knowings.
A lot of people don't do the math around this
and they're like, I don't get it.
Why are we not hitting our numbers? Well, simple math.
But then you're like, well, how do we mobilize it?
Well, instead of saying you need to go generate 500 K
of opportunities, so like, look,
we need to go after 50 target customers.
Let's start there.
Let's get the momentum going
and then we can scale from there.
And this way, depending on what stage you're in,
you could be in the founder lead stage,
you could be where you have the other extreme where.
you know, we work with companies upwards of 40 million
in ARR, and we work with companies that are pre-revenue.
So it's the same principles.
Really, you can go to your team and say, cool,
we need to generate 50 opportunities.
Who's gonna be responsible for what?
And this is where the power comes.
Instead of just putting out a big number,
you can start to say, okay,
let's break down this 50 into the key areas
we can generate this pipeline.
Let's start with marketing.
Maybe we do an inbound process where we actually
put out content, we put out a manifesto,
we generate quality pipeline,
and they become sales conversations
because we nurtured them.
Let's also think about outbound.
Maybe we hire an SDR or I do it myself,
and I go after 50 to a 100 of our people
in our ideal customer profile.
And you can also say, let's do some referrals.
Let's go to our existing customers,
they're happy, and ask them for one to five referrals.
We'll incentivize them,
and that can get us at least 10 new customers.
And that's the power of this entire equation,
which I'll still call secret
because it's mind boggling to me
how many founders and how many SaaS leaders
suffer where they're like, I don't get it.
We should be doing better. We should be hitting our number.
But really it's simple math
and they don't know how to break it down
into these simple numbers.
Now, you can actually go with your team, your co-founder,
whichever stage you're in and say, look,
we need 50 opportunities.
What are we gonna do for marketing?
What are we gonna do for outbound?
And what are we gonna do for referrals?
Let's lock in all three of these
and that will allow us to hit this number
of 50 target opportunities.
Out those 50 opportunities,
we'll have customer conversations,
we'll collect data that will clarify our roadmap,
that will help us figure out
what we need to pivot in our pricing,
or the way we make an offer, or the way we run our demo.
And that will also allow us to generate revenue.
And as we do this, we'll get better and better and better,
and this win rate will start to go up.
And that will allow us to even go after bigger targets.
And as we start to figure out, well,
this channel is working really well in marketing,
this outbound angle is really working,
our customers love us, so they're referring us.
You can scale these things
and you can start to generate more opportunities.
And that is how you remove the invisible hand
with the power of this pipeline coverage equation,
and you're able to drive growth for your SaaS business.
So to recap, to figure out your pipeline coverage,
number one, figure out your target number,
then put in your win rate, divide the two,
and you get your pipeline coverage.
That's how much pipeline you need,
divided by your average contract value,
your average deal size,
and that's how many opportunities you need.
Divvy up that number between marketing,
outbound and referrals,
and you can generate those opportunities.
You can get them into the sales process
or the conversion process.
You can collect the data,
you can iterate, and you get better and better,
and you scale this over time.
And that's the power of the secret,
but not so secret pipeline coverage equation.
And now you know exactly what you need to do
to figure out what is that invisible hand?
What is my target number?
And how do I make sure I generate enough pipeline?
Now what you may not know is, TK, this is great,
but I don't know how to generate these 50 opportunities.
I don't quite know how to spin up a marketing machine
so I can put out a manifesto and generate quality pipeline.
I don't know how to do outbound.
I don't know how to mobilize my customers for referrals.
I don't know how to do any of these things.
Or maybe I'm doing some of these, but it's just not working.
The go-to-market strategy is just not working.
This is exactly why I created my SaaS
Go-To-Market coaching program.
Inside of this program, I help you do three things.
First, we really clarify your ideal customer profile.
This is the specific targeted set of customers
you're gonna go after that's perfect for your product.
Second, we build out a manifesto.
This is your strategic message.
This is how you communicate your value proposition
in the market to attract these customers.
This turns into a marketing manifesto.
This turns into the value prop you use in your outbound.
This is what you give to your customers
to mobilize the entire market
to generate these 50 opportunities
that you can then work in your sales and marketing process.
And then I teach you how to run a Broadway show.
A Broadway show is a consistent set of sales
and marketing activities that you can run
to generate this pipeline
and generate these 50 opportunities.
It's an incredible program.
If you wanna learn more about it
and you wanna work together
to actually revamp your go-to-market strategy
and hit your pipeline goals,
'cause remember pipeline cures all,
just go to tkkader.com/gtm. tkkader.com/gtm.
It's an incredible program.
When you go to that page,
you'll get all the details around the program.
If it sounds like you'd like to work together,
you just have to fill a form, we'll get on a call.
The better the fit, the better the results.
Which is why we get on a call to really understand
where you are with your business and we can help you.
If it sounds like it's a great fit,
we'll be off to the races.
I will work with you directly to revamp
your go to market strategy
and accelerate your path to that next stage of growth,
and build out that scale go to market strategy
so you can actually hit your revenue numbers seamlessly.
So just go to tkkader.com/gtm for all the details
and I'll also link to it below.
Also, if you got value from this video,
please smash that like button for the YouTube algorithm.
It just loves it when you do that.
And so do we,
my team and I put a lot of love into these videos.
You'd be amazed how long it takes to create a video
like this that's maybe 15, 20 minutes,
but it takes a full day to really put these together
because that's what it takes
to get to this level of clarity for you.
So smash out like button for the YouTube algorithm.
Also, I drop an episode like this
every single Sunday with an actionable strategy
and tactics on how to grow your SaaS business faster.
So be sure to hit that subscribe button
and that bell icon, if you haven't done so already.
If you have a fellow co-founder, if you have a team member,
if you're part of a Slack group
or a WhatsApp group with other SaaS founders,
please share this video with them.
Just mean the world to us.
And lastly, remember,
everyone needs a strategy for their life and their business.
When you are with us, yours, it's gonna be unstoppable.
I'm TK, and I'll see you in the next episode
or inside the SaaS Go-To-Market coaching program
where we can work together.
Take care everybody.
(outro music)