ACV (Annual Contract Value)
ACV (Annual Contract Value) is the value of a customer contract normalised to one year, usually excluding one-time fees. A three-year, $90,000 deal has an ACV of $30,000.
Formula
ACV = total contract value (recurring portion) ÷ contract length in years
Worked example
A $150,000 deal covering 24 months of subscription plus a $10,000 setup fee has ACV of $140,000 ÷ 2 = $70,000.
ACV describes deal size where ARR describes the whole business: average ACV tells you which go-to-market motion you can afford. Sub-$5k ACV businesses live or die on self-serve; $100k+ ACV supports field sales and long cycles.
Watch definitional drift: some teams include first-year one-time fees in ACV (closer to a bookings view), others strictly exclude them. Either is defensible — but state which you use, because a 15% setup fee moves the number materially.