Product metrics and goals
Average contract value (ACV)
Also called ACV, Annual contract value
The average yearly value of a customer contract, used by businesses that sell annual or multi-year deals.
How it's worked out
Total annual contract value of deals won ÷ number of deals won (one-off fees left out)
ACV sets much of a sales-led business: how much it can spend to win a deal, how many salespeople it needs, and how long a sales cycle it can afford.
For multi-year contracts, divide the total by the number of years, so a three-year $60,000 deal counts as $20,000 a year.
In practice
15 deals worth $300,000 a year in total give an ACV of $20,000.
Common mistake
Including one-off setup or services fees, which make ACV look higher than the revenue that will recur.