Sales bookings refer to the value of won opportunities over a given time period. More specifically, they are a key sales metric that is calculated by taking the total dollar value (including factors like subscription, implementation, and discounts) that a customer has committed to spend on your product or service within a given time period.
Sales bookings are somewhat universally used to describe sales that are either committed, signed, or won. That said, sales bookings usually aren’t valid unless a product or service has been delivered. Bookings are added to the sales booking metric when your product or service has successfully been placed in the hands of your customer.
Sales bookings are generally used as a high-level sales metric to help managers and executives make decisions and forecast.
Sales bookings are not the same as revenue. While sales bookings refer to, as we mentioned, the delivery of products or services to your customers, revenues refer to the settlements of liabilities or assets resulting from your business operations. When a customer signs a deal with you, you don’t necessarily have any revenue in your hands. This is because, when a customer signs up for your product or service, it simply marks the start of a booking.
Why, then, the lack of revenue? Put simply, in most cases customers aren’t always billed for the full period up front as soon as they sign a contract for a booking. Rather, they’re billed on a certain time period (e.g. monthly).
The sales booking metric therefore shows you, at a high level, the sum total that you will be making over a set period of time from your total current bookings. It helps one to calculate the total dollar value of a contractual obligation from a customer for a product or service within a specified time-frame. It is an important indication of expected revenue that will be recognized over that time frame.
The metric is particularly useful in enabling teams to make predictions and determine strategies they can put in place to increase the number of bookings (such as adjusting pricing strategies, marketing and advertising expenditures, contracting, and so on).
To calculate your sales bookings, take the sum total value of your signed contracts.
For example, if you sign a one year (12-month) subscription-based contract for, let’s say, $50,000 on January 15th that starts on February 1st, that would be a $50,000 booking with ~$4,167 of revenue recorded for that first month.