Sales bookings
Bookings = the total contract value committed by the customer at signature.
Includes the full contract value, not just what's recognized in the current period.
For a 3-year, $100K/year contract, bookings at signature = $300K.
Bookings is the metric sales teams are typically compensated on.
Revenue
Revenue = the portion of bookings that has been earned and recognized under GAAP (typically over time as the service is delivered).
For a 3-year, $100K/year contract, revenue recognized in year 1 = $100K. Years 2 and 3 are deferred.
Revenue is what investors and finance teams primarily report. It's the GAAP metric.
ARR (Annual Recurring Revenue)
ARR = the annualized run-rate of recurring revenue at a point in time.
For the same 3-year, $100K/year contract, ARR at signature = $100K (because that's the annual amount, regardless of contract length).
ARR is the dominant valuation metric for SaaS companies. Public SaaS valuations often track to ARR multiples.
Variants: New ARR, Expansion ARR, Contraction ARR, Churned ARR. Net New ARR is the sum.
When each matters
Bookings: sales compensation, board reporting, growth rate tracking.
Revenue: GAAP financials, public reporting, tax.
ARR: investor pitch, valuation, run-rate forecasting.
Common confusion
Confusing bookings with revenue. They're different. A booking is a commitment; revenue is what's recognized.
Treating multi-year deals as a single year of revenue. The recognition happens over time.
Reporting ARR with non-recurring items mixed in. ARR is recurring only.
Frequently asked questions
What's the difference between sales bookings and revenue?
Bookings is total contract value at signature. Revenue is the portion earned and recognized under GAAP over time.
What's the difference between ARR and bookings?
ARR is annualized run-rate at a point in time. Bookings is total contract value. A 3-year $100K/year deal has $300K bookings and $100K ARR.
Which metric do investors care about most in SaaS?
ARR is the dominant valuation metric for SaaS. Revenue is the GAAP standard. Bookings is the sales metric.
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