ACV vs TCV: annual vs total contract value
ACV and TCV both describe deal size, but over different horizons. Mixing them up inflates or deflates your reported numbers and confuses forecasting.
ACV is the workhorse for sales metrics because it normalizes deals of different lengths. TCV matters for cash, bookings, and understanding total customer commitment.
Short answer
Annual contract value (ACV) is the yearly value of a contract; total contract value (TCV) is its full value across the entire term, including one-time fees. A 3-year deal worth 300,000 dollars has an ACV of 100,000 dollars and a TCV of 300,000 dollars. ACV normalizes deals for comparison; TCV shows total commitment.
Key takeaways
- ACV is the annualized value of a contract.
- TCV is the full value across the entire term plus one-time fees.
- ACV normalizes deals of different lengths for comparison.
- TCV reflects total commitment and cash over the contract.
When to use each
Use ACV for sales metrics that compare deals: average deal size, quota, win rate by size, and ARR contribution. Because it strips out contract length, a 1-year and a 3-year deal become comparable. Use TCV for bookings, cash planning, and measuring the total value a customer has committed to.
A common definitional choice is whether ACV includes one-time fees. Most teams exclude them from ACV (keeping it purely recurring) but include them in TCV.
How Ardovo handles it
Ardovo stores both ACV and TCV on every deal and rolls them up separately, so bookings and recurring metrics never get crossed. Rook can show average ACV trends while keeping TCV available for cash and commitment views.
Frequently asked questions
What is the difference between ACV and TCV?
ACV is the annual value of a contract; TCV is its total value across the full term, usually including one-time fees. A 3-year 300,000 dollar deal is 100,000 dollars ACV and 300,000 dollars TCV.
Does ACV include one-time fees?
Usually not. Most teams keep ACV purely recurring and put one-time implementation or services fees into TCV. Define it consistently so your metrics reconcile.
Which should I use for average deal size?
ACV, because it normalizes contracts of different lengths into a comparable annual figure. Using TCV would make long multi-year deals look artificially larger than short ones.