Glossary

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Glossary / Evaluation and implementation guide

Annual Contract Value (ACV)

Annual Contract Value (ACV) is the average annualized revenue per customer contract, typically calculated by dividing total contract value by the number of years in the term, excluding one-time fees.

It differs from ARR (Annual Recurring Revenue), which aggregates all active recurring revenue company-wide, and from TCV (Total Contract Value), which counts the full multi-year amount.

ACV is used to compare deal sizes, segment customers, and set sales capacity plans.

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A practical example

Example: a three-year contract worth $54,000 in subscription fees plus a $6,000 one-time implementation fee has an ACV of $18,000, since the one-time fee is excluded from the annualized figure.

What to evaluate before investing

  • Check whether the tool lets you define ACV calculations explicitly — what is annualized, what is excluded — rather than using a hidden formula.
  • Verify multi-year deals, mid-term upgrades, and discounts are handled consistently across reports.
  • Confirm ACV can be segmented by source, segment, or rep so deal-size trends are traceable to campaigns.

Limitations and tradeoffs

ACV definitions vary between companies — some include services, some exclude ramp periods — so comparing your ACV against benchmarks or other teams without aligning definitions can be misleading.

Plan your next step with MeshLine

Connect this decision to your automation, organic marketing and customer lifecycle management. In a MeshLine demo, discuss your existing tools, the scope you need and how to measure the result.

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