ACV (annual contract value) is the average annualized revenue from one customer contract, focusing on recurring subscription value rather than total contract length or one-time charges.

How it works

A $120,000 two-year subscription has $60,000 ACV. If the deal includes a $30,000 onboarding fee, many companies report ACV on the subscription only. Sales leaders track average ACV across new logos and expansions to see upmarket motion.

ACV differs from TCV (total contract value—the full multi-year commitment) and from company-level ARR (sum of recurring revenue across all customers). A startup can have rising ACV per deal while ARR growth slows if win rates drop.

Why it matters

• Founders: Align sales compensation and CRM fields on one ACV definition before board meetings disagree on pipeline math.
• Investors: ACV trends signal ICP shifts. Enterprise pivots show up here before they dominate headline ARR.
• Operators: Customer success plans differ for low-ACV velocity accounts vs high-ACV strategic accounts.

Common mistake

Reporting TCV as ACV to inflate pipeline. A five-year, $500,000 TCV deal is not $500,000 ACV—it depends on how you normalize years and what’s recurring.

Related ideas

ARR, TCV, ACV expansion, and net revenue retention.