Subject areaMetrics and measurement
Annual contract value (ACV) is the average yearly value of a contract, calculated by dividing the total value by the years it runs.
It is used for multi-year contracts and subscriptions, and allows customers with different durations to be compared.
It guides the choice of sales model: a high ACV justifies dedicated sellers and account-based marketing programmes, a low ACV calls for more automated channels. Together with customer acquisition cost it shows how long a customer takes to pay back what it cost to win them.
An example
A maintenance services company signs a three-year contract worth ninety thousand euros: the ACV is thirty thousand. Against an acquisition cost of fifteen thousand euros, the customer pays back the sales spend in six months.
Enrico Giubertoni. Licensed under CC BY-NC 4.0: you may quote, translate and adapt this entry with the author’s name and a link, stating any changes. For commercial use, write to info@enricogiubertoni.com
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