Pipeline Conversion Rate: Formula, Calculation, and Optimization

What is pipeline conversion rate?

Conversion rates in general help us understand what proportion of a starting amount has been successfully converted and concluded. The pipeline conversion rate metric indicates the share of pipeline opportunities which were won (converted to Bookings) in each period.

Why is pipeline conversion rate important to measure?

Conversion rate metrics are incredibly useful tools in the revenue analysis toolbox. This type of metric answers a dual purpose as it helps companies both evaluate operational performance and estimate future business results. The pipeline conversion rate metric is one of the most widely-used and impactful of these metrics.

First, this metric provides a measure of the success that the company has had in converting the potential revenue of open opportunities in the pipeline to actual booked revenue. This is useful when comparing the performance of different teams and sales people, as well as how well opportunities from different lead sources and industries are doing. Second, this metric is often used to provide context and historical benchmarks for estimating future bookings given the amount of starting pipeline in these periods.

How is pipeline conversion rate calculated?

The basic formula for calculating the pipeline conversion rate involves dividing the amount of pipeline opportunities which were won by the amount of all pipeline opportunities.
This metric comes in three variations which offer different benefits depending on the situation:

Net conversion rate

The share of the starting pipeline which was successfully converted to Bookings during the period. This metric is useful in answering the question "how much of the starting pipeline do we expect to be closed-won as Bookings?". This metric should also be calculated for each pipeline forecast category.

Gross conversion rate

The ratio between the starting pipeline and Bookings during the period. This metric accounts for changes and new opportunities added during the period and is useful in answering the question "what is the amount of Bookings we won - in total - compared with our starting pipeline?". It enables measuring historical success rates, comparing results between periods, and creating projections based on the starting pipeline of current or future periods.

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Total conversion rate

This metric indicates the share of the total open pipeline that was closed-won in a given period. The total potential open pipeline includes new Pipeline, pulled-In opportunities and changes to starting pipeline. It provides a measure of how successful the company has been in converting the potential pipeline within a given period to closed-won bookings.

All the SaaS revenue metrics you need

Pipeline conversion rate is only one of the hundreds of SaaS metrics that are available out-of-the-box to users of the Sightfull revenue analysis and optimization platform. It includes all of the critical metrics required for SaaS companies, from indicators regarding campaigns and lead conversions, through those that track pipeline, conversion and bookings, and all the way to later signals such as retention and expansion.

These highly precise customizable metrics are automatically calculated based on a large repository of SaaS industry standards, best practices and benchmarks. This saves lots of time for RevOps teams since they don’t have to rely on data analysts for support, waste time on error-prone spreadsheets, or manually create and update dozens of reports.

Sightfull users also receive dozens of pre-built dashboards based on these metrics, enabling them to easily analyze revenue trends at a highly granular level, identify their root causes, and act on proactive insights regarding time-sensitive business issues.