What is the difference?
ACV vs TCV
Annual Contract Value
Total Contract Value
What is it?
Annual Contract Value (ACV) is the dollar amount an average customer contract is worth to your company in one year. There tends to be less universal consensus on the definition of ACV compared to some other SaaS metrics, such as Annual Recurring Revenue. For example, some companies include one-time initial charges like setup or training in their ACV calculations, while others don’t.
Total Contract Value (TCV) is the sum value of a contract over its life cycle. It takes into account not only the initial purchase price, but also any additional costs such as installation and maintenance fees that may be incurred over time. To calculate TCV, these costs must be added together to get an estimate of the total contract value over its life.
Who is it for?
Categories
Formula
Example
You have 100 customers. 30 signed a 3-year contract with a contract value of $90,000, equivalent to $30,000 / year. 30 signed a 2-year contract with a contract value of $80,000, equivalent to $40,000 / year. 40 signed a 1-year contract with a contract value of $50,000, equivalent to $50,000 / year First Year Annual Contract Value = ( (30,000 x 30) + (40,000 x 30) + (50,000 x 40) ) / 100 customers Year 1 ACV = $41,000 Second Year Annual Contract Value = ( (30,000 x 30) + (40,000 x 30) ) / 60 customers Year 2 ACV = $35,000 Third Year Annual Contract Value = (30,000 x 30) / 30 customers Year 3 ACV = $30,000
For example, if you purchase a piece of equipment for $100,000 and then have to pay a maintenance fee of $2,000 every year for five years, your total contract value would be $110,000.
Published and updated dates
Date created: Oct 12, 2022
Latest update: Mar 31, 2023
Date created: Mar 31, 2023
Latest update: Mar 31, 2023