Average Contract Value (ACV)
Definition
Average Contract Value is the average annual revenue per customer contract. Used to segment customers and set sales strategy.
Extended Definition
Formula: ACV = Total Contract Value / Contract Length in Years. Example: 3-year contract worth $150k has ACV of $50k. High ACV (over $100k) supports enterprise sales teams. Low ACV (under $10k) requires self-service or inside sales. ACV influences: sales cycle length, customer acquisition strategy, support model, feature prioritization.
Related Terms
ARR (Annual Recurring Revenue)
ARR is the yearly value of recurring subscription revenue. It's MRR × 12, normalized to show annual run rate. SaaS investors care about ARR more than MRR at scale.
LTV (Lifetime Value)
LTV is the total revenue you expect from a customer over their entire relationship with your business. It's the north star for determining how much you can afford to spend on acquisition.