Sales Forecasting from Pipeline to Capacity Planning

A Visual Guide to Connecting Your Sales Funnel, Forecasts, and Capacity Planning

Introduction

Sales forecasting and headcount planning start with one core concept: understanding your sales funnel. By connecting pipeline metrics to sales targets, you can accurately project revenue and plan the number of reps needed to hit goals.

This guide covers:

• How leads convert into deals

• Key funnel metrics: conversion rate, win rate, sales cycle

• How to calculate opportunities & leads required to meet targets

• How to translate sales goals into headcount capacity plans

Sales Funnel

The sales funnel begins with leads, which can come from different sources — such as Marketing Qualified Leads (MQLs) generated through inbound activity or a rather curated contact list of prospects identified as a good fit based on your Ideal Customer Profile (ICP) analysis. Once engaged, qualified leads progress to the Opportunity stage, where discovery calls, meetings, and product demos take place. The funnel concludes when opportunities are closed, either as Closed Won or Closed Lost.

The quality of leads is measured by the conversion rate — the percentage of leads that turn into opportunities within a specific period. For example, if your sales team generates 100 opportunities from 1,000 leads created and processed in a month, the conversion rate is 10%.

The win rate is a key funnel metric that reflects both the quality of opportunities and the sales team’s effectiveness in converting them. It’s calculated as the ratio of Closed Won opportunities to all closed opportunities.

Another important metric in pipeline planning is the sales cycle — the average time it takes for a lead to progress from initial engagement to becoming an opportunity and ultimately reaching a closed outcome.

Sales Capacity

In a B2B sales model, revenue is typically driven by sales representatives (reps) through assisted, relationship-based sales motions. Each rep is assigned a quota—monthly, quarterly, or annual—based on business expectations for how many leads they convert and deals they close.

Quotas vary depending on the role:

• Hunters focus on acquiring new logos or accounts, with post-sale management usually handled by customer success teams.

• Farmers manage and grow existing accounts, often through upsells and expansions.

Most quotas are expressed as a bookings dollar target for a specific period, though in some cases (especially when deal sizes are uniform) they may be set as a required number of new logos.

The sales team’s overall capacity is the sum of all individual quotas. In practice, however, not every rep achieves their quota, some overperform, while others fall short. To build a realistic plan, the company’s sales target should be modeled as a fraction of the quota rollup. On average, an effective sales team achieves about 80–90% of the total assigned quota.

Sales Target

The sales target for a specific period is determined based on the company’s long-term financial plan and several key factors, including the current run rate, expected improvements in sales productivity, planned investments in the sales organization, total addressable market (TAM), growth opportunities, and overall market potential. It also incorporates expectations from investors, the board, and executive leadership, as well as any top-down mandates that influence revenue goals.

Pipeline & Capacity Planning

Starting with capacity: by analyzing historical data, we can determine the average deal size (AOV), the quota per rep, and the average attainment rate. If investments are being made in sales operations or productivity improvements, those assumptions can be adjusted upward. Using these inputs, the number of sales reps required can be calculated as:

Reps Needed = Sales Target ÷ (AOV × Average Quota Attainment)

Comparing this requirement to the current roster provides a clear hiring roadmap for the upcoming fiscal year.

Once headcount is aligned, the focus shifts to pipeline planning. Working backward from the sales target, we calculate the required opportunities (using historical win rates) and then the required leads (using conversion rates). If investments are improving funnel efficiency—such as better lead quality or higher opportunity conversion—those assumptions can also be factored in. From this, we can estimate the number of leads needed per rep to ensure the team hits its overall sales goals.

From Sales Target to execution: translate goals into leads and sales rep requirements.