Backlog % represents the proportion of your company's available revenue capacity that is already committed to existing contracts or projects. It gives insight into how much of your future workload is already spoken for.
A higher Backlog % indicates more stability and less pressure on short-term business development. If you have a backlog over 75%, it might be a sign you could grow your team. A lower Backlog % may signal the need for immediate marketing and sales activity to fill the pipeline. If your backlog falls below 25%, it might be a sign that you should consider downsizing. Well-run A/E firms aim for a Backlog % between 50%–75% of their annual revenue capacity. That’s about 6-9 months’ worth of work and would signal a sustainable company size. The ideal figure does vary depending on company size, project type, and sales cycle length. In unpredictable economies, this average drop significantly.
Backlog % = Backlog Amount / (Annual Net Revenue x 100)
So Backlog % indicates how much future work is secured compared to your company's annual revenue.