Annual contract value (ACV) is the average yearly revenue of a single customer contract, excluding one-time fees. Total contract value (TCV) is the contract's full value across its entire term.
ACV and TCV describe the size of a single deal rather than the whole business. Sales and finance teams use them to compare contracts, set quotas, and judge deal quality, especially in businesses with multi-year agreements where one number can hide a long commitment.
How Annual contract value (ACV) works
ACV is the contract’s recurring value divided by its term in years, excluding one-time fees. A $90,000 three-year contract has an ACV of $30,000. TCV is the full value over the entire term, including one-time fees: that same contract has a TCV of $90,000, or more if it carries a setup fee.
The difference matters because TCV rewards long commitments while ACV normalizes them. A one-year $30,000 deal and a three-year $90,000 deal have the same ACV but very different TCV. Reporting both prevents a long contract from looking like outsized annual performance.
Annual contract value (ACV) examples
A customer signs a two-year contract at $50,000 per year with a $10,000 one-time onboarding fee. ACV is $50,000 (recurring only, per year). TCV is $110,000 ($50,000 × 2 + $10,000).
A month-to-month customer at $2,000 per month has an ACV of $24,000 and, with no fixed term, a TCV that is usually reported as the same $24,000 annualized figure until a term is committed.
Annual contract value (ACV) vs TCV
| ACV | TCV | |
|---|---|---|
| Window | Per year, averaged | Entire contract term |
| One-time fees | Excluded | Included |
| Best for | Comparing deals on equal footing | Total committed value of a deal |
| 3-yr $90k deal | $30,000 | $90,000 (+ fees) |
Benefits & when to use it
ACV is the right lens for comparing deals and sizing a sales motion, because it strips out term length and one-time noise. TCV is the right lens for cash commitment and for weighing the value of locking in a multi-year customer.
Both are contract metrics, not run-rate. For the whole-business view use ARR; for the monthly operational view use MRR. And like those metrics, ACV and TCV cover committed recurring value, not variable usage, which is tracked separately.
FAQ
What is the difference between ACV and TCV?
ACV is the average annual recurring value of a contract; TCV is the full value over the whole term including one-time fees. A $90,000 three-year contract is $30,000 ACV and $90,000 TCV.
Does ACV include one-time fees?
No. ACV measures recurring value only, so deals are comparable regardless of setup or services fees. Those one-time amounts are captured in TCV instead.
How is ACV different from ARR?
ACV is per contract; ARR is per company. ACV is the average yearly value of one customer's deal, while ARR sums the annualized recurring revenue across all customers.
How Credyt handles Annual contract value (ACV)
Credyt does not author contracts or compute ACV, but for usage- and credit-based products it keeps the recurring and variable parts of each customer's spend cleanly separated in real time. That makes it straightforward for finance to base ACV and TCV on the committed portion and report consumption revenue on its own. Explore Credyt →