What is Bookings?
Bookings represent the total value of new contracts signed during a period. When a customer signs a deal, it's a booking. The money hasn't arrived yet, and you can't recognize it as revenue, but you have a contractual commitment.
Bookings are a leading indicator of future revenue. Strong bookings today mean strong revenue in the coming months. Weak bookings signal trouble ahead, even if current revenue looks healthy.
Why Bookings Matter
Bookings reveal sales momentum before it shows up in revenue. A company can have great revenue from past deals while new bookings collapse. By the time revenue drops, it's too late to fix the sales problem.
Investors track bookings closely during due diligence. They want to see consistent or growing bookings, not a business coasting on old contracts.
Types of Bookings
New Bookings: First-time customer contracts. Renewal Bookings: Existing customers re-signing. Expansion Bookings: Upsells and add-ons. Each type tells a different story about business health.
Formula
Total Bookings = New Contract Value + Renewal Contract Value + Expansion Contract Value
Booking to Revenue Ratio = Bookings ÷ Revenue (should be near 1.0 for steady state)
Example
Q4 bookings breakdown:
- New customer contracts: $400,000
- Renewals: $600,000
- Expansions: $150,000
Total Bookings = $1,150,000
If Q4 revenue was $1,000,000, your bookings-to-revenue ratio of 1.15 indicates healthy growth momentum.