Annual Contract Value (ACV)

Annual Contract Value (ACV) is the value of a customer contract averaged over one year, regardless of the contract’s actual length. A three-year, $300,000 deal and a one-year, $100,000 deal both show up as $100,000 ACV, useful for comparing deal sizes across a sales team without multi-year terms skewing the picture.

The trap is confusing ACV with ARR once multi-year deals, ramps, or mid-term discounts enter the mix; each requires its own normalization rule, and a model that blends them inconsistently under-reports or overstates growth. See Annual Recurring Revenue for the related metric.