This Docusign blog dives into the difference between two key metrics for calculating contract value: Annual Contract Value (ACV) and Total Contract Value (TCV). While both measure the value of customer agreements, they offer unique insights into business performance. 

In the blog, you’ll discover how ACV and TCV are calculated, their advantages and limitations, and when to use each to guide strategic decisions for your organization. Whether you're optimizing marketing initiatives, planning annual revenue, or targeting high-value customers, these metrics play a pivotal role in leveraging the value of agreements.

✍️ Key Takeaways:
Annual Contract Value (ACV):

• Definition: The average revenue a contract generates per year.
• Formula: ACV = Total contract value (excluding one-time fees) ÷ total years in the contract.
• Use Cases: Useful for analyzing annual revenue, sales campaigns, and customer retention efforts.
• Limitations: Does not account for one-time purchases or customer attrition.

Total Contract Value (TCV):

• Definition: The total revenue a contract generates, including recurring fees and one-time charges.
• Formula: TCV = Monthly recurring fee × contract length + one-time fees.
• Use Cases: Ideal for optimizing sales targeting, marketing initiatives, and a holistic measurement of customer value. 
• Limitations: Assumes all revenue will be realized and is less predictive for annual planning.

💬 Community Chat:

• What’s your preferred metric for measuring contract value—ACV, TCV, or something else? Why?
• What challenges have you faced in calculating or interpreting ACV or TCV?
• Any questions about them or advice you might want from the Community?

Jump into the conversation and share your thoughts in the comments below!