Weighted Pipeline Value

What is the Weighted Pipeline Value?

The Weighted Pipeline Value is a measure of sales forecasting, found by determining the likelihood of closing the deals you have at the moment. Because assessing the chances of closing a deal can be difficult, this KPI helps evaluate appropriate risk levels for your company’s pipeline.

Weighted Pipeline Value is regarded as a highly accurate metric, due to its basis in raw data. Another valuable aspect of this KPI is its flexibility – you get to decide what percentage level of risk is acceptable at each stage of the sales pipeline, and define what “risk” or “success” means to begin with. So long as your standards are justifiable and consistent, your Weighted Pipeline Value will prove a powerful and valuable tool.

Weighted Pipeline Value is a useful KPI for your sales team to monitor.

Just what do we mean by Weighted Pipeline Value?

Weighted Pipeline Value is important because it measures the likelihood of a deal closing at every stage of the sales cycle/pipeline. It does so by assigning a weight, or percentage, to every stage of the pipeline based on the likelihood of the deal progressing past this stage in real life.

For example, you might assign a weight of 30 percent – a 30 percent chance – to a deal making it past the qualification stage, which you say is worth 50,000 Danish kroner. Thus, the weighted value of the deal at this stage is 15,000 kr.

Similarly, you might assign a 70 percent chance to closing a deal in the final negotiation stage. This stage is assigned a monetary value of 100,000 kr, so a 70 percent chance translates to a value of 70,000 kr. Both the first and second values added give a sum of 85,000 kr. You can then add the monetary values and probabilities of the remaining stages of the sales pipeline to obtain the Weighted Pipeline Value.

Calculating Weighted Pipeline Value

Weighted Pipeline Value is calculated by adding all forecasted revenue values obtained in a given period.

To find the forecasted revenue for a given transaction, multiply its value by its probability of closing.

Weighted vs. unweighted Pipeline Value: What to measure?

Because Weighted Pipeline Value is a descriptive statistic and not a quota, it reflects the deal-closing process rather than your specific goals. Thus, use this KPI to synthesize the accumulated data of your sales pipeline.

Being able to assess the value of each stage of the pipeline stands in contrast to the unweighted pipeline value, which takes into account only whether a deal was made or not. Both of these metrics can be useful in different contexts – the weighted value when detailed data exists about the sales pipeline stages, when customer trends can be easily identified, and when it is industry practice to use weighted pipeline value.

On the other hand, unweighted pipeline value is better for those cases where the pipeline funnel becomes too complex to make accurate predictions, or if reliable sales data is unavailable. In these cases, the sale / no sale binary is paramount, as this is the only information you’re trying to find.

Other KPIs similar to Hit Rate include:

• Sales Conversion Rate
• Average Sales Cycle Length
• Average Deal Size