Annual Contract Value (ACV) refers to the total value of a contract or subscription over a period of one year. In business, particularly in subscription-based models such as Software as a Service (SaaS), ACV is used to measure the revenue generated from a customer’s subscription or contract on an annual basis.

It represents the recurring revenue that a company expects to receive from a customer over the duration of their contract. Calculating ACV is important for businesses to understand the value of their customer relationships, forecast revenue, and evaluate the financial health of their subscription-based business model. ACV is typically calculated by multiplying the average monthly subscription fee by twelve months, although it may also include additional fees or charges associated with the contract.

By tracking ACV, businesses can make informed decisions about pricing, customer acquisition, and retention strategies to maximize revenue and profitability.