Definition
ACV (Annual Contract Value) is the annualized value of a contract, commonly used in enterprise sales reporting.
Why it matters
ACV helps compare deal size across contracts of different lengths, but it is not the same as ARR or recognized revenue.
Pricing implications
Discounts and concessions reduce ACV and margins. Use ACV alongside retention metrics to avoid overstating health.
Measurement tips
Normalize multi-year contracts by dividing total contract value by the number of years.
Checklist
- Define ACV consistently across teams.
- Separate ACV from ARR and bookings.
- Track ACV by segment and sales channel.
- Exclude one-time fees from ACV.
- Reconcile ACV with contract data.
- Use ACV for sales performance, not churn analysis.
- Document discount policies in ACV reporting.
- Compare ACV trends quarter over quarter.