Revenue is a key indicator for any business, especially in the technology services sector. While it often takes center stage in financial statements, other metrics like bookings and sales pipeline data provide valuable insights into future business performance.
A company’s pipeline encompasses all potential deals within the CRM, providing key opportunity data such as deal size, expected close dates, and probabilities of closing. This information enables management to forecast future business activity with greater precision.
While the unweighted pipeline offers an overview, applying probabilities creates a more accurate weighted pipeline, reflecting realistic close expectations. Once deals are confirmed as “closed won,” their total contract value (TCV) is counted toward bookings for a given period, marking the transition from potential to realized business.
Both the pipeline and bookings are indicators of future revenue. By tracking these metrics, companies can forecast and manage their growth more effectively, ensuring a clear view of their financial trajectory.
Revenue, however, is recognized once earned. For example, an original deal with a TCV of $1 million and 10 months of expected length may generate $100,000/month of revenue. We can think of a deal’s lifecycle as pipeline -> bookings -> revenue.
Metrics like Win Ratio (closed won deals vs. total deals in quantity or dollar amount) and Book-to-Bill Ratio (bookings to revenue for the period) can offer insights into future revenue at the company when applied to the pipeline.
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