ACV (Average Contract Value)
Average Contract Value is the average annual revenue per customer contract. Used to segment customers and set sales strategy.
What Is ACV (Average Contract Value)? Formula and Examples
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.
Examples
A customer signs a 2 year contract worth $80,000 total. ACV is $80,000 divided by 2 years, which is $40,000 per year. A sales team selling at that ACV can usually justify a longer sales cycle and a dedicated account executive, unlike a $2,000 ACV product sold through self-service.