ACV (Annual Contract Value)
The average annualized revenue per customer contract, excluding one-time fees.
What it means
Annual Contract Value normalizes the value of customer contracts to a yearly amount. If a customer signs a 3-year deal worth $90k, the ACV is $30k. ACV helps you compare customers on equal terms regardless of contract length. It's especially useful for enterprise SaaS where deal sizes and durations vary significantly.
Formula
ACV = Total contract value ÷ Contract years
Why it matters
ACV determines your sales strategy. Low ACV ($100-$1,000/year) typically requires self-serve or PLG motion. Mid-ACV ($1k-$25k) can support inside sales. High ACV ($25k+) usually needs a field sales team. Your ACV directly influences marketing strategy, content approach, and how you structure your funnel.
What is ACV in SaaS?
ACV (Annual Contract Value) is the average yearly revenue per customer contract, calculated by dividing total contract value by the number of years. It excludes one-time setup fees.
What is the difference between ACV and ARR?
ACV is per-contract; ARR is company-wide. ARR = sum of all active ACVs. ACV tells you about individual deal sizes, while ARR shows total recurring revenue.
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