What is the book-to-bill ratio?

The book-to-bill ratio compares new contract bookings to revenue billed over a period, indicating whether the business is growing, stable, or contracting. For professional service firms, a ratio above 1.0 means bookings exceed billings (backlog growing), while a ratio below 1.0 means billings exceed bookings (backlog shrinking). The ratio provides a forward-looking indicator of revenue trajectory.

Key characteristics

• Compares bookings to billings in a period

• Ratio above 1.0 indicates growth

• A ratio below 1.0 indicates contraction

• Leading indicator of future revenue

• Should be tracked monthly or quarterly

• One period may fluctuate; trend matters more

Why it matters for professional service firms

Revenue shows what happened; book-to-bill shows what is coming. A firm billing $500K monthly with only $400K in new bookings (0.8 ratio) is depleting its backlog and will see revenue decline without improvement. Conversely, a 1.3 ratio indicates healthy growth ahead. Professional service firms should track book-to-bill monthly, investigating sustained periods below 1.0 and building capacity during sustained periods above 1.0.

Real-world example

Tom's consulting firm tracked the monthly book-to-bill: January: 0.85; February: 0.92; March: 0.78; April: 0.81. Four months averaging 0.84 indicated backlog was depleting 16% faster than it was being replenished. At the current pace, the 6-month projection showed a significant revenue decline. Response: increased business development focus, accelerated proposals in the pipeline, and partner involvement in key pursuits. May through August: average ratio improved to 1.15, with backlog rebuilding. The early warning from book-to-bill tracking enabled course correction before the revenue impact materialized.