Annual contract value (ACV)
Also called ACV
Annual contract value is a contract's average yearly value: the total contract value divided by the number of years.
Why it matters to a budget owner
ACV makes contracts of different lengths comparable. A three-year contract worth 90,000 has an ACV of 30,000.
An average hides ramps. If the three years cost 20,000, 30,000 and 40,000, the ACV of 30,000 is wrong for every single year.
What to record
- Total value and term length
- The year-by-year schedule if it ramps
Frequently asked questions
Should I budget with ACV?
Only when the price is flat. For a ramped deal, budget each year at its own figure.
General working knowledge about commercial contracts, not legal advice. Your own agreement governs.
Glossary
Look up related terms
- Total contract value (TCV)Total contract value is everything a contract commits you to pay over its full term, including one-off and recurring fees.
- Ramped pricingRamped pricing charges a different amount in each year of a multi-year contract, usually rising from a discounted first year.