Annual Contract Value Calculator — ACV from TCV and Term

Background.

Annual contract value turns one contract into one number: what it is worth per year. Divide the recurring subscription value of the whole contract by its term in years and you have it. A three-year deal worth $180,000 in total has an ACV of $60,000, a monthly value of $5,000, and a total contract value of $200,000 once its $20,000 implementation fee is included.

The arithmetic is one division. The disagreement is entirely about what goes into the numerator — and it is a real disagreement, not a detail. Unlike revenue, ACV is defined by no standard-setter: not FASB, not the IASB, not the SEC. It is a sales-operations convention, and firms genuinely differ on whether implementation, onboarding and professional-services fees belong in it. Three treatments are in live use, and this calculator implements all three rather than picking one and hiding the choice. Excluding the fees gives an ACV of $60,000. Amortising them across the term gives $66,666.67. Loading them into year one gives $80,000. Same contract, three defensible answers, a third of a spread between the extremes.

The default here is to exclude them, for a reason that is inherited rather than invented. Both authorities this page cites draw the same recurring/non-recurring boundary for annual recurring revenue: a16z states that ARR "should exclude one-time (non-recurring) fees and professional service fees", and Bessemer keeps the combined figure as a separate metric it calls ARRR, "the ARR, plus any non-recurring revenue related to items such as professional services, transactions, and implementations". Neither source defines ACV itself, and this page does not pretend otherwise — but a convention that contradicts the ARR boundary produces contract values that cannot be aggregated into ARR without double-counting non-recurring money, which is the practical reason exclusion won.

That aggregation point is the one caveat that changes how the number should be read, so it belongs here rather than in an accordion. Only the recurring ACV is safe to add up across a book of contracts and call ARR. A year-one ACV includes money that will not recur, so summing a portfolio of them overstates the recurring base by the whole of the first-year fee load; an amortised ACV overstates it by the annual slice. If you use either of the non-exclude treatments, keep them for deal sizing and commission plans and use the recurring figure for anything that feeds a revenue metric.

One convention surprises people every time: terms shorter than twelve months annualise upward. A six-month contract worth $60,000 has an ACV of $120,000, because ACV asks what a year of this contract is worth, not what the customer has committed. That is the standard treatment and it is arithmetically correct, but it means a book full of short pilots can post an ACV total far above anything the company will collect. And because ACV has three live definitions, SEC Release 33-10751's requirement that a registrant presenting an operating metric disclose its definition and method of calculation is not bureaucratic here — it is the only thing that makes two companies' ACVs comparable.

What is annual contract value (acv) calculator?

Annual contract value is the value of a single customer contract expressed per year: the contract's total recurring value divided by its term in years. A $180,000 three-year subscription has an ACV of $60,000. It is used to size individual deals, set quotas and commission plans, and compare customers of different contract lengths on a like-for-like basis. Total contract value (TCV) is the related figure covering the whole term, including any one-time fees; ACV is TCV normalised to a year, and by the most common convention it excludes those one-time fees. ACV is not defined by FASB, the IASB or the SEC, and no accounting standard governs it — which is why three different treatments of implementation and professional-services fees are all in live use. It is also distinct from ARR: ACV describes one contract, ARR describes a whole recurring revenue base, and only an ACV computed on the recurring-only convention can be aggregated into ARR without double-counting money that does not renew. For terms shorter than a year, ACV scales the contract up rather than down, because it answers what a year of the contract is worth rather than what the customer has committed in total.

How to use this calculator.

1. 01Enter the recurring subscription value of the whole contract across its full term. A three-year deal at $60,000 a year is $180,000 — not $60,000, and not the first year's invoice.
2. 02Enter the committed term in months. Watch short terms: anything under twelve months annualises upward, so a six-month contract's ACV is twice its total value.
3. 03Enter any one-time fees in the same contract — implementation, onboarding, training, data migration, custom development.
4. 04Choose how those fees should be treated. Exclude is the most common convention and the only one whose output can be aggregated into ARR. Amortise spreads them over the term. Year-one loads the whole amount into the first year.
5. 05Read the ACV together with the recurring ACV. If they differ, the gap is non-recurring money, and the note beside the result says whether the figure is safe to aggregate.
6. 06Use the same treatment every time. A book of contracts computed under mixed conventions is not a comparable set, and for a registrant it is exactly the inconsistency SEC Release 33-10751 requires to be disclosed.

The formula.

The term in months is divided by twelve to give the term in years, and the recurring total contract value is divided by that to give the recurring ACV. Dividing the same total by the term in months instead gives the contract's monthly value — its contribution to MRR. The chosen treatment then decides what happens to any one-time fees. Excluding them leaves ACV equal to the recurring figure. Amortising divides the fees by the term in years and adds that slice, so a $20,000 fee on a three-year contract adds $6,666.67 a year. Loading them into year one adds the whole fee, producing a first-year ACV that does not describe any later year of the same contract. Three outputs — recurring ACV, monthly value and total contract value including fees — are identical in all three modes, so switching treatments changes only the headline and the fee line. All arithmetic is carried at full decimal precision and rounded once, at the return boundary, to two decimal places; the amortised ACV is computed from the unrounded parts, which is why a $105,000 seven-month contract returns exactly $180,000 rather than the $180,000.00 you would get by rounding $171,428.57 and $8,571.43 separately and hoping they reconcile.

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.