Hi guys:
I'm trying to learn more about metrics and valuation for SaaS business, and would really appreciate your help!
I was reading this link below:
https://www.profitwell.com/blog/understanding-saa…
Bookings are also important to track in context with your recognized revenue (explained a bit more below). If you’re booking a lot of business, but not recognizing that revenue (delivering the product to your customer) you may have major implementation issues. If you’re not booking a lot relative to your revenue, then tough times may be on the horizon.
I guess I have 2 questions:
1) are "booking" and "ARR" always the same? When /why would they ever be different?
2) In the paragraph I copied from the link above, why would there be tough times on the horizon if you are not booking a lot relative to your revenue? What's the ideal Booking/Revenue ratio then? What's considered "too low"?
Thanks!
Also, could someone please explain how to convert ARR into Bookings? Thanks!
Bookings and ARR are almost always the same thing, unless a business is reporting booked non-recurring services which is atypical.
A lag between revenue and ARR isn’t necessarily because the company is bad at implementation — some heavyweight enterprise solutions just take longer to get up and moving, or a company may be relatively young and have a backlog. Gotta take everything in context.
Low bookings IS a big problem because it means the company is struggling to sign new customers / grow. That said the better way to look at it is in the context of YoY new ARR growth (i.e. excluding existing customers / upsell), not relative to revenue.
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