What is ACV (Annual Contract Value)?
ACV (Annual Contract Value) is the average yearly revenue generated from a customer contract. It standardizes multi-year deals to a yearly value, making it easier to compare customer accounts and forecast recurring revenue.
Table of Contents
Full Definition
ACV helps sales and finance teams understand the recurring revenue stream on an annual basis.
It simplifies comparison of contracts of different lengths.
Tracking ACV supports strategic pricing and customer segmentation.
Examples
Standardizes contract revenue
Supports forecasting
Guides pricing strategies
Benefits
May not capture total contract value
Can be misleading if not considering contract length
Requires clear contract definitions
Common Mistakes
Use ACV alongside total contract value for complete insights.
Conclusion
Use ACV alongside total contract value for complete insights.