SaaS Metric
Annual Contract Value (ACV)
Definition
Annual contract value (ACV) is the average yearly revenue a single customer contract generates, normalized to a one-year basis. ACV = total contract value ÷ contract length in years. It differs from total contract value (TCV), which is the full multi-year value, and from ARR, which sums annualized recurring revenue across all customers. ACV is most useful for understanding deal size and segmenting customers.
Formula
ACV = total contract value (excluding one-time fees) ÷ contract term in years
Benchmark
There is no universal ACV benchmark — it varies enormously by segment, from tens of dollars for self-serve SMB to six or seven figures for enterprise. Track it as a trend and by segment, not against an absolute target.
ACV vs. TCV vs. ARR
These three are easy to confuse. Total contract value (TCV) is the entire value of a contract over its full term, including one-time fees. ACV annualizes that to a single year, usually excluding one-off charges, so multi-year deals are comparable. ARR sums the annualized recurring revenue across your whole customer base — it is a company-level metric, while ACV is a per-contract one.
Example: a three-year contract worth $90,000 plus a $6,000 setup fee has a TCV of $96,000 and an ACV of roughly $30,000 (the $90,000 recurring portion ÷ 3 years). Keeping setup fees out of ACV keeps it a clean read on recurring deal size.
Frequently asked questions
What is the difference between ACV and ARR?
ACV (annual contract value) is the average annualized value of a single customer contract. ARR (annual recurring revenue) is the total annualized recurring revenue across all customers. ACV describes deal size; ARR describes the size of the whole business.
How do you calculate ACV?
Divide the total contract value (excluding one-time fees such as setup or onboarding) by the contract term in years. A $60,000 two-year contract has an ACV of $30,000.
What is a good ACV?
There is no universal target — ACV ranges from a few dollars in self-serve SMB products to hundreds of thousands in enterprise. What matters is whether your ACV is rising over time and how it maps to your acquisition cost and payback period.
Related metrics
Annual Recurring Revenue (ARR)
Annual recurring revenue (ARR) is the normalised yearly value of recurring subscriptions. Learn the ARR formula, how it differs from MRR and total revenue, and when to use it.
Average Revenue Per Account (ARPA)
ARPA (average revenue per account), also ARPU, is recurring revenue divided by number of accounts. Learn the formula, why it matters for pricing and LTV, and how to grow it.
Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) is the fully loaded sales and marketing spend to win one customer. Learn the CAC formula, the LTV:CAC ratio, and healthy SaaS benchmarks.
CAC Payback Period
CAC payback period is how many months of gross margin it takes to recoup the cost of acquiring a customer. Learn the formula and healthy SaaS benchmarks.
Track this automatically
Connect Stripe and RetentionLens computes ACV for you — with cohorts, trends and churn-risk scoring. Start on the free tier.
Benchmarks are general SaaS ranges and vary by segment, stage and business model. Last reviewed 2026-05-30.