ACV

Category: Metrics & KPIs · Level: Mid · Also called: Annual Contract Value

TL;DR

Annual Contract Value — the recurring revenue value of a single customer contract on a per-year basis, a standard B2B SaaS deal-size metric.

ACV is the average annualized value of a customer contract. It's the granular dimension of ARR — total ARR is roughly customers × ACV. SMB SaaS often runs $1–10K ACV, mid-market $10–50K, enterprise $50K+. The ACV band determines which sales motion makes sense (PLG, inside sales, field sales).

New-deal ACV is the most-watched ACV; expansion ACV per existing customer is a leading indicator of NRR.

Formula

ACV = TCV ÷ Contract Length in Years

  • TCV — Total contract value over the entire term, including ramps but excluding one-time fees
  • Contract Length in Years — Length of the contract in years

For non-ramping contracts, ACV equals annualized subscription value. For ramping contracts, ACV is the average annual value across the term.

Worked example

A 3-year contract: $80k year 1, $100k year 2, $120k year 3. TCV = $300k; ACV = $300k ÷ 3 = $100k. Sales reps are usually comp'd on year-1 ACV ($80k), not blended ACV.

Common pitfalls

  • Reporting blended ACV when SMB and enterprise customers behave very differently.
  • Confusing ACV with TCV (total contract value across the full term).
  • Tracking ACV without tracking ACV growth — a flat ACV means the company isn't moving upmarket.

When this shows up in a pitch deck

ACV appears on the Sales Model slide and is used to size pipeline coverage.

Related terms

  • Total Contract Value — The total value of a customer contract over its full term, including recurring fees, one-time fees, and committed expansion.
  • ARR — Annual Recurring Revenue — the value of subscription contracts on a normalized 12-month basis, the headline SaaS revenue metric.
  • MRR — Monthly Recurring Revenue — the normalized monthly value of all subscriptions in force, often used by month-to-month subscription businesses.
  • Win Rate — The percentage of qualified sales opportunities that result in closed-won deals over a given period.
  • Sales Velocity — A composite measure of how quickly a sales team converts pipeline into closed revenue, derived from deals × win rate × ACV ÷ cycle length.

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