Average Contract Value (ACV)

Average Contract Value (ACV) is a key performance indicator in sales that represents the normalized annual revenue a business earns from customer contracts, even when those contracts span multiple years.

 

This metric is essential for subscription-based and SaaS companies, as it standardizes revenue into a yearly figure that better reflects the company’s financial health. Importantly, ACV can also illustrate the impact of partnerships on revenue streams.

 

For instance, collaborations through channel partners, co-selling initiatives, or targeted partner marketing strategies often enhance the value of contracts by extending market reach and offering bundled services.

 

By calculating the total contract value divided by the contract duration in years, businesses gain valuable insights into pricing effectiveness, growth opportunities, and overall partner-driven sales performance.​​

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