What is ACV (Annual Contract Value)?
Also known as: Annualized contract value, average contract value
ACV is the annualized value of a customer contract — the per-year average if you spread the contract evenly across its term. Used heavily to size deals and segment customers.
What is ACV?
ACV normalizes contracts to a yearly value so you can compare them apples-to-apples. A $2,000/month subscription has ACV of $24,000. A 3-year, $90,000 contract has ACV of $30,000.
How to calculate ACV
ACV = Total Contract Value / years in contract.
For a single-year subscription: ACV ≈ MRR × 12 (close enough). For ramped or multi-year contracts, take TCV and divide by the number of years.
ACV vs TCV vs ARR
TCV is the full contract dollars (one-time + recurring × years). ACV is the per-year average. ARR is the run-rate snapshot of recurring revenue at a moment in time. They are not interchangeable.
Why it matters
ACV is the standard sales segmentation lens. "Enterprise" = high ACV. "SMB" = low ACV. Quotas, pipeline coverage, and commissions are usually built on ACV, not MRR.