Annual Contract Value ACV

ACV Definition

ACV (annual contract value) shows the worth of a contract as a KPI that is normalized to a year. It´s a yearly value of of an individual customer and very helpful in subscription based business as a sales KPI.

Basically, it’s the average annual dollar amount a contract is worth, excluding any one-time fees or purchases.^[1]

Annual contract value (ACV) calculates the revenue generated from a single contract normalized over a year.^[2]

Since it´s clearly a calculated thing, we must understand it as KPI that makes success of sales comparable among all the sales guys a company have. It´s counted only once --> Depending on the company's rules in the year or quarter or month of deal closing.

The calculation is very simple:

ACV = (total contract value) / (number of years)

• for total contract value look at TCV.
• number of years means: the number of years the subscription is valid