The average annualised recurring revenue of a single customer contract, normalised to a one-year value.
ACV = total recurring contract value ÷ contract length in years
A three-year deal worth £90,000 in total recurring value plus a one-off £5,000 setup fee.
£90,000 ÷ 3 = £30,000 ACV (the £5,000 setup fee is excluded)
ACV measures what one contract is worth per year. It takes the recurring value of a deal and expresses it on an annual basis, so a three-year contract worth £90,000 in total has an ACV of £30,000, not £90,000. One-off fees like setup or onboarding are usually excluded so the figure stays comparable across deals.
ACV is the language of sales-led SaaS. It lets you compare deals of different lengths on equal footing, size your average contract, and reason about sales capacity — how many ACV-sized deals a rep needs to close to hit quota. It is closely related to ARR, but ACV is per-contract whereas ARR is the whole book.
Be careful about what you fold in. Some teams report ACV net of discounts and excluding services; others include the first year of usage commitments. There is no single regulator-blessed definition, so the discipline is to pick one and apply it consistently across the pipeline.
ACV tells you how big your average deal is and underpins sales planning — quota setting, capacity modelling, and pipeline coverage all lean on it. A rising ACV signals you are moving upmarket or pricing better; a falling one can warn that discounting or smaller deals are creeping in.
ACV varies enormously by motion: low hundreds of pounds for self-serve SMB products, tens of thousands for mid-market, and six figures or more for enterprise. Judge it by its trend and against your sales cost, not an absolute target.
ACV is the per-year value of a contract; TCV is the total value across its entire length. A three-year £90,000 deal has a TCV of £90,000 and an ACV of £30,000.
ACV is measured per contract — the annual value of one deal. ARR is the annualised recurring revenue of your whole customer base. Sum the ACV of all active contracts and you approach ARR.
Usually not. Setup fees, onboarding, and one-time professional services are typically excluded so ACV reflects only the recurring, comparable portion of a deal.
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