Source: https://www.revvly.ai/glossary/acv

[Glossary](https://www.revvly.ai/glossary)

# Annual contract value (ACV)

Also: ACV

**Annual contract value is the average yearly value of a customer contract, normalised to twelve months. A three-year deal is divided over its term. ACV helps compare deals of different lengths and sizes, and is mainly used for sales planning and segmentation rather than as a revenue figure.**

## Formula

`ACV = total contract value ÷ contract length in years`

## How to read it

Be explicit about what is included: recurring fees only, or also one-time and usage amounts. ACV describes a contract at signing, whereas ARR describes the current state of all active subscriptions, so the two diverge as customers expand or contract.

## Further reading

- [Annual contract value: what it is and when it matters more than ARR](https://www.revvly.ai/blog/annual-contract-value-what-it-is-and-when-it-matters)

## Related terms

- [Annual recurring revenue (ARR)](https://www.revvly.ai/glossary/arr)
- [Monthly recurring revenue (MRR)](https://www.revvly.ai/glossary/mrr)

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