Annual Contract Value (ACV)

The Annual Contract Value (ACV) is the average one-year value of a customer contract. ACV is used in SaaS businesses that sell one- or multi-year agreements. ACV most often refers to renewable items such as software or services that can be renewed in the next period. Examples of non-renewable items include implementation fees and one-time training fees.

EXAMPLE: 

You have a total of 3 customers:

  • Customer 1 has a 1-year contract. They paid $12,000 per year for software only. Their ACV is $12,000.
  • Customer 2 has a 3-year contract for $30,000. Their ACV is $10,000 ($30,000 contract value ÷ 3 years).
  • Customer 3 has a 1-year contract for $18,000, of which $12,000 was for software, $3,000 was for continual training access for employees (which they plan to renew each year), and $3,000 was for implementation. Their ACV is $15,000 ($12,000 for software + $3,000 for continuous training).


In this example, the company’s average ACV is $12,333.33. [($12,000 for customer 1 + $10,000 for customer 2 + $15,000 for customer 3) ÷ 3 total customers]