Revenue Metrics

ACV: Annual Contract Value

The annualised value of a single contract, regardless of contract length.

Definition

Annual Contract Value (ACV) is the annualised value of a single contract. A three-year £150,000 deal has an ACV of £50,000. ACV normalises deal sizes so you can compare deals and forecast capacity consistently.

Formula

ACV = Total Contract Value ÷ Contract Length in Years

ACV = TCV / Contract Length (years)

Worked example

A £24,000 annual subscription has £24,000 ACV. A three-year £90,000 contract has £30,000 ACV and £90,000 TCV. After typical discounting, a £2,000/month list-price product might land at £21,600 effective ACV.

Why it matters

ACV drives the sales motion. A £5k ACV product needs volume, self-serve and SDR-led inbound. A £500k ACV product needs enterprise AEs, SEs, multi-stakeholder cycles and 6-12 month deal lengths. Knowing your ACV bands tells you how to staff, comp and forecast.

Common mistakes

  • Reporting Total Contract Value (TCV) as if it were ACV in board packs
  • Computing average ACV without segmenting by deal size band (the average can mask a U-shaped distribution)
  • Treating ACV and ARPA as interchangeable (ACV is per contract; ARPA is per account)

Related terms

ARRARPAWin RateSales Cycle Length

Read more in The Guide

Chapter: Metrics That Matter →

Sources & further reading

  • — Drawn from Evara's working definitions used on retained search and revenue advisory engagements (2024–2026).
  • — Reconciled against industry conventions in SaaStr, OpenView SaaS Benchmarks and Bessemer State of the Cloud.
  • — Reviewed by Rich Evans, Strategic Advisor at Evara and former operator/founder.

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