ACV vs ARR: what is the difference?
ACV and ARR are closely related but operate at different scopes. ACV describes a single deal; ARR describes the whole book of recurring business. Mixing them up confuses deal-level and company-level conversations.
The link is simple: add up the recurring annual value of every active contract and you get ARR. ACV is the per-deal building block; ARR is the total.
Short answer
ACV (annual contract value) is the annualized value of one contract; ARR (annual recurring revenue) is the total annualized recurring revenue across all active contracts. ACV is a per-deal metric used in sales, while ARR is a company-wide metric. Roughly, the sum of all recurring ACV equals your ARR.
Key takeaways
- ACV is the annual value of one contract.
- ARR is total annual recurring revenue across all contracts.
- ACV is per deal; ARR is company-wide.
- Summed recurring ACV approximates ARR.
When to use each
Use ACV when talking about deals: average deal size, quota, win rate by deal value, and sales comp. Use ARR when talking about the business: total scale, growth rate, and valuation. A rep closes ACV; a company reports ARR.
The one nuance is one-time fees. ACV is sometimes defined to include them and sometimes not, while ARR is strictly recurring. Keep the definitions consistent so summed ACV reconciles to ARR.
How Ardovo handles it
Ardovo tracks ACV on every deal and rolls it up to ARR automatically, so deal-level and company-level numbers reconcile. Rook can show average ACV trends and total ARR from the same data without the two ever drifting apart.
Frequently asked questions
What is the difference between ACV and ARR?
ACV is the annualized value of a single contract; ARR is the total annualized recurring revenue across all active contracts. ACV is a per-deal sales metric, while ARR is a company-wide metric.
Does summed ACV equal ARR?
Roughly, yes. Adding the recurring annual value of every active contract gives ARR. They reconcile as long as ACV is defined consistently, particularly whether one-time fees are included, which ARR always excludes.
Which should sales reps be measured on, ACV or ARR?
Reps are measured on the ACV they close, since that is the per-deal recurring value they generate. ARR is the company-level total those deals roll up into, used for scale, growth, and valuation.