Average Contract Value (ACV) represents the typical yearly revenue a company earns from each customer contract. It is a key measure for subscription-based and SaaS companies that often work with multi-year agreements.
Add up the full worth of every contract signed in a given period.
If the contracts span multiple years, divide the total contract value by the number of years to determine annualized revenue.
Record the total number of contracts in the calculation.
Divide the annualized contract value by the number of contracts to arrive at the average.
ACV = Total Contract Value ÷ Number of Years in the Contract
In SaaS, ACV differs based on target customers. Small to mid-sized businesses often see ACVs near $5,000 annually, while enterprise contracts may range upward of $100,000 per year.
ACV measures the average annual revenue per contract, while ARR sums all recurring revenue across the customer base within a year.
Generally, ACV focuses on recurring revenue. However, some companies may choose to include setup fees if they are a significant portion of the contract value.
Not effectively. ACV benchmarks vary widely by product type, market segment, and sales strategy, so comparisons are most useful within the same industry.
Comparing ACV with CAC helps determine if customer acquisition efforts are cost-effective and sustainable.