ACV (Annual Contract Value)

What is ACV?

Annual Contract Value (ACV) represents the average yearly revenue from a single customer contract. Unlike ARR which sums all contracts, ACV focuses on the typical deal size your sales team closes.

ACV helps you understand your market segment and sales motion. Low ACV (under $5K) typically means self-serve or SMB sales. Mid-market ACV ($5K-$50K) requires inside sales. High ACV ($50K+) demands enterprise field sales.

Why ACV Matters

Your ACV determines your go-to-market strategy. You can't afford enterprise sales reps closing $2K deals, and you don't need them for self-serve products. Misaligned ACV and sales motion is a common startup killer.

Investors use ACV to benchmark your business. Enterprise SaaS companies average $50K-$500K ACV. Mid-market sits at $10K-$50K. SMB and prosumer products live below $10K ACV.

ACV vs TCV

ACV normalizes to one year. TCV (Total Contract Value) is the full contract amount. A 3-year, $300K deal has $300K TCV but $100K ACV.

Your recent deals:

• Customer A: $60,000 for 2 years = $30,000 ACV
• Customer B: $48,000 for 1 year = $48,000 ACV
• Customer C: $90,000 for 3 years = $30,000 ACV

Average ACV = ($30K + $48K + $30K) ÷ 3 = $36,000

This ACV suggests mid-market positioning requiring inside sales with occasional field support.