ACV (Annual Contract Value)

The annualised value of one customer contract.

Example

A $2,000/mo contract has a $24,000 ACV.

Important

ACV determines what sales motion you can afford. A $500 ACV cannot support a human salesperson and demands self-serve.

Related terms

  • ARR (Annual Recurring Revenue) — MRR multiplied by 12 — the annualised run rate of your recurring revenue.
  • Sales cycle — The time from first contact to signed contract.
  • Unit economics — The profit or loss on a single customer, once you strip out fixed costs.

Lessons that explain it

  • Business models — Subscription, transaction, marketplace, usage, licence. The model shapes your margin, your sales motion and how much money you need. (12 min)
  • Closing and following up — Most deals are lost to silence, not to a no. Asking clearly and following up systematically wins more than any technique. (10 min)

All 176 terms in the Founder glossary