ACV vs TCV
ACV and TCV are the two ways SaaS companies size a deal. Sales reports one; finance reports the other; investors want both.
The key difference: ACV is the annualised value of the contract; TCV is the total value across the entire contract term, including one-off fees.
| Dimension | ACV | TCV |
|---|---|---|
| What it measures | Recurring revenue per year | Total dollars over the full contract |
| Includes one-off fees? | No — subscription only, annualised | Yes — setup, services, training, hardware |
| Contract length effect | Same for a 1-year and a 3-year deal at the same rate | Grows with contract length |
| Used for | ARR planning, sales quotas, cohort analysis | Bookings, commissions, cash-flow forecasting |
| Larger of the two | Smaller — one year's worth | Larger — full-term value |
When to use ACV
Use ACV when you're comparing deals, planning ARR, or tracking sales productivity year over year.
When to use TCV
Use TCV when you're reporting bookings, sizing sales commissions, or forecasting total cash from a signed contract.
FAQs
How is ACV calculated on a multi-year deal?
Total subscription value ÷ number of years. A $300K three-year subscription = $100K ACV. Non-recurring fees are excluded.
Which do public SaaS companies report?
Both, but ARR (very close to ACV summed across customers) is the headline metric. TCV shows up in bookings disclosures.
Do sales reps get paid on ACV or TCV?
Depends on the plan. TCV-based commissions reward long deals; ACV-based commissions align reps with retention. Many companies do a hybrid.
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