Annual contract value (ACV)

The annual contract value (ACV) is the average annual revenue generated from a customer’s contract in a subscription-based business model, such as software-as-a-service (SaaS).

ACV is typically calculated for one year of a customer’s contract and excludes any one-time fees, like setup or onboarding costs.

How do you calculate annual contract value (ACV)?

To calculate ACV, you can follow this formula:

ACV = (Total Contract Value) / (Contract Length in Years)

For example, if a customer signs a two-year contract worth $12,000, the ACV would be:

ACV = ($12,000) / (2 years) = $6,000

ACV is an important metric for subscription-based businesses, as it provides insights into the average revenue generated per customer contract on an annual basis. This information helps companies evaluate the effectiveness of their sales and marketing efforts, forecast future revenue, and make informed decisions about pricing, product development, and customer acquisition strategies.


Just in

Tembo raises $14M

Cincinnati, Ohio-based Tembo, a Postgres managed service provider, has raised $14 million in a Series A funding round.

Raspberry Pi is now a public company — TC

Raspberry Pi priced its IPO on the London Stock Exchange on Tuesday morning at £2.80 per share, valuing it at £542 million, or $690 million at today’s exchange rate, writes Romain Dillet. 

AlphaSense raises $650M

AlphaSense, a market intelligence and search platform, has raised $650 million in funding, co-led by Viking Global Investors and BDT & MSD Partners.

Elon Musk’s xAI raises $6B to take on OpenAI — VentureBeat

Confirming reports from April, the series B investment comes from the participation of multiple known venture capital firms and investors, including Valor Equity Partners, Vy Capital, Andreessen Horowitz (A16z), Sequoia Capital, Fidelity Management & Research Company, Prince Alwaleed Bin Talal and Kingdom Holding, writes Shubham Sharma. 

Capgemini partners with DARPA to explore quantum computing for carbon capture

Capgemini Government Solutions has launched a new initiative with the Defense Advanced Research Projects Agency (DARPA) to investigate quantum computing's potential in carbon capture.