Definition
ACV is the annualized value of a contract. Teams use ACV to compare deal size across different contract lengths.
Formula
ACV = total recurring contract value / contract years
Common mistakes
- Including one-time services fees in ACV and treating it as recurring.
- Comparing ACV across segments with different discount policies without context.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "ACV (Annual Contract Value)" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Required Pipeline Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Required pipeline: how much pipeline (and how many deals) you need) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Required Pipeline Calculator: Estimate how much pipeline (and how many opportunities) you need to hit a revenue target given win rate and average deal size.
- Sales Funnel Targets Calculator: Translate a revenue target into required wins, opportunities, SQLs, MQLs, and leads using funnel conversion rates.
Guides
- Required pipeline: how much pipeline (and how many deals) you need: Translate a revenue target into required pipeline dollars, wins, and opportunities using win rate and average deal size.
- Sales funnel targets: leads -> MQL -> SQL -> opp -> win (how to plan): A practical guide to back-solving funnel volume targets from a revenue goal using conversion rates and average deal size.
- Sales ops metrics hub: quota, pipeline, win rate, and capacity planning: A practical hub for sales ops planning: quota attainment, pipeline coverage, required pipeline, sales capacity with ramp, and OTE math.