Annual Contract Value (ACV)

Annual Contract Value measures customer revenue on an annualized basis. For an individual contract, ACV represents the annual value of that contract. Across a customer base, average ACV represents the annualized revenue generated per active customer.

ACV provides a simple measure of customer size, but as an average it can mask a wide distribution between smaller and larger accounts.

Changes in ACV can reflect shifts in customer mix, pricing, or expansion within the existing customer base. Rising ACV may indicate movement toward larger customers, while falling ACV may indicate a shift toward smaller accounts.

The trend is generally more informative than the absolute level because typical ACV varies widely by market and go-to-market model.

MetricFrame calculates ACV by annualizing ending customer revenue and dividing it by the number of active customers. It also calculates ACV for newly acquired customers, providing a view into how the size of new customers compares with the existing base.