Annual Contract Value Calculator — ACV from TCV and Term

Background.

A rep closes a five-year deal worth $150,000 in the same week a colleague closes a one-year deal worth $90,000. On total value the first looks bigger. Per year it is a third of the size: $30,000 against $90,000. Annual contract value exists to make that comparison fair. It divides the recurring value of one contract by its term in years, so deals of different lengths sit in the same column for quotas, commission plans, pricing reviews and decisions about which accounts get a dedicated manager.

The division is not where the arguments start. They start with what goes into it. No standard-setter defines ACV — not FASB, not the IASB, not the SEC — and companies handle one-off charges such as implementation, onboarding and data migration in three ways: they leave them out, spread them across the term, or put the whole amount into the first year. On a three-year, $180,000 subscription carrying a $20,000 setup fee, those three choices give $60,000, $66,666.67 and $80,000.

Leaving the fees out is the most common choice, and the reason is aggregation. Andreessen Horowitz's widely cited list of startup metrics says ARR "should exclude one-time (non-recurring) fees and professional service fees", and Bessemer Venture Partners gives the combined figure a name of its own, ARRR. Only an ACV built on that same boundary can be summed across a customer book and reported as recurring revenue without counting setup money that will never come back.

One more convention catches people out. Contracts shorter than twelve months annualise upwards, so a six-month, $60,000 pilot has an ACV of $120,000.

What is annual contract value (acv) calculator?

Annual contract value is the average yearly value of a single customer contract: its recurring subscription value over the whole term divided by the term in years. It is a sales-operations measure rather than an accounting one. Revenue under ASC 606 is allocated to performance obligations and recognised as each is satisfied, which bears no fixed relationship to a contract's annualised value. ACV also differs from total contract value, the full committed amount usually including one-time fees, and from ARR, which sums recurring value across every live contract at a point in time.

How to use this calculator.

1. 01In the total contract value field, enter the subscription value for the whole term — $60,000 a year for three years is $180,000 — rather than the first invoice or the annual price.
2. 02Enter the committed term in months. Renewal options the customer has not yet exercised are not part of the commitment.
3. 03Put anything charged once — implementation, onboarding, training, data migration, custom development — in the one-time fees field. A discount on the subscription is not a negative fee; lower the contract value instead.
4. 04Choose the fee treatment your company already reports with and keep using it. Excluding fees is the only setting whose result can be added up into ARR.
5. 05Compare the headline ACV with the recurring ACV beneath it. Any gap between them is non-recurring money, and the note under the result explains how it got there.

The formula.

The term in years is the term in months divided by 12. Recurring ACV is the subscription total divided by years, and the monthly value is the same total divided by months, which is this contract's contribution to MRR. The fee treatment then sets the headline. Excluding fees leaves ACV = TCV ÷ years. Amortising gives ACV = (TCV + F) ÷ years, where F is the one-time fees. Loading them into year one gives ACV = TCV ÷ years + F, a figure that describes the first year only.

The recurring ACV, the monthly value and the contract total including fees (TCV + F) are identical under all three treatments. Switching the setting moves only the headline and the line showing how much of the fee was folded in.

Dividing by years has two side-effects worth knowing. Terms under twelve months push ACV above the contract's whole value. And amortising over such a term inflates the fee too: a $20,000 fee on a six-month contract adds $40,000 a year, twice the fee itself, because the slice is annualised along with the subscription. Year-one loading adds the fee at face value and never does that.

The arithmetic assumes the subscription is spread evenly. Ramps, step-ups and usage charges the contract does not fix are averaged into one figure.

A worked example.

Frequently asked questions.

References& sources.

1. [1]Jordan, J., Hariharan, A., Chen, F., & Kasireddy, P. (21 August 2015). "16 Startup Metrics." Andreessen Horowitz. Source for the recurring/non-recurring boundary this page's default treatment inherits: ARR "should exclude one-time (non-recurring) fees and professional service fees." NOTE: this source defines ARR, not ACV — no cited authority defines ACV, and the page says so. Retrieved 29 July 2026; quote verified against the live page.
2. [2]Deeter, B. (2 October 2012). "The five accounting metrics for cloud companies." Bessemer Venture Partners Atlas. Independent second authority drawing the same boundary three years earlier and giving the combined figure its own name: "ARRR is the ARR, plus any non-recurring revenue related to items such as professional services, transactions, and implementations." Also does not define ACV. Retrieved 29 July 2026; quote verified.
3. [3]U.S. Securities and Exchange Commission (30 January 2020). Release No. 33-10751, "Commission Guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations." Requires a registrant presenting an operating metric to disclose its definition and method of calculation, and to flag material changes — the discipline a metric with three live definitions needs. Effective 25 February 2020. sec.gov returns HTTP 403 to automated fetchers; release identifiers verified independently.
4. [4]Financial Accounting Standards Board (May 2014). Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." Context for why ACV is not a revenue measure: the transaction price is allocated to performance obligations and recognised as they are satisfied, which bears no fixed relationship to a contract's annualised value. Authoritative PDF; URL verified live (HTTP 200) 29 July 2026.