Sales Math, Forecasting, and Compensation

The Numbers Behind Predictable Revenue

Selling is a craft, but scaling is arithmetic. These are the core calculations every founder and sales leader should know by heart. The benchmark ranges below are common rules of thumb, not laws; your own historical data always beats any generic number.

Pipeline Coverage

To hit a target, you need more pipeline than target, because not every deal closes. Coverage is the ratio of open pipeline value to the quota for that period.

Formula: Coverage = Open pipeline value / Quota
Rule of thumb: many B2B teams aim for 3x to 4x coverage.
Worked example: to close $500,000 this quarter at a 25% win rate, you need roughly $2,000,000 in qualified pipeline, which is 4x coverage.

Win Rate and Sales Velocity

Velocity tells you how fast revenue moves through your pipeline, and it exposes exactly which lever to pull.

Formula: Velocity = (Number of qualified opps x Win rate x Average deal size) / Sales cycle length in days
Worked example: 40 opps x 0.25 win rate x $20,000 / 60 days = $3,333 of new revenue generated per day.
The four levers are volume, win rate, deal size, and cycle time. Improving any one raises velocity; cycle time is often the most overlooked.

Forecast Categories

A clean forecast uses consistent definitions so numbers mean the same thing to everyone.

Category	Definition	Typical confidence
Commit	Will close this period, barring disaster	90%+
Best Case	Realistic upside if things go well	50-70%
Pipeline	Active but not yet committed	20-40%
Omitted	Too early or unlikely this period	under 20%

Quota and Capacity

Quotas should ladder up to the company target with room to spare, and account for ramp.

Rule of thumb: set total team quota at roughly 1.2x the revenue target to absorb underperformance.
A new rep rarely produces at full quota immediately; model a ramp of 3 to 9 months depending on deal complexity.
Worked example: a $6,000,000 target with reps carrying $750,000 quotas needs 8 fully ramped reps, so plan to hire ahead of the number, not on it.

Compensation Design

Comp should reward the behavior you actually want, and be simple enough to explain in one minute.

A common account-executive split is 50% base and 50% variable, quoted as On-Target Earnings (OTE).
Worked example: $120,000 OTE means $60,000 base plus $60,000 variable at 100% of quota.
Accelerators pay a higher rate above 100% of quota to reward overperformance; clawbacks reverse commission if a deal churns quickly.
Keep the plan clean: too many rules and reps optimize for the plan instead of the customer.

Territory Sizing

Fair, well-sized territories prevent both burnout and idle capacity.

Divide the total addressable accounts by the number of reps, balancing by potential value, not just count.
A rep can typically run meaningful cycles with 30 to 75 active accounts, depending on deal size and motion.
Rebalance when a rep is consistently capacity-constrained or starved, not after a single slow month.

Quick Reference

Coverage: aim for 3x to 4x pipeline against quota.
Velocity has four levers: volume, win rate, deal size, cycle time.
Use consistent forecast categories so numbers mean one thing.
Set team quota above target and model rep ramp.
Comp should reward the behavior you want, and stay simple.
Balance territories by value, not just account count.