Glossary
Annual Contract Value (ACV)
The annualized value of a customer
ACV, or annual contract value, represents how much revenue a customer provides on an annual basis.
ACV is used in a handful of ways by business owners, sales, finance, and revenue teams to make sense and valuate their business and individual customers.
Annual contract value is commonly used when determining commissions and commission frequency. If customers pay monthly recurring fees for your product, rather than paying a recurring commission to the sales rep, you can use ACV to calculate a one-time commission to the rep. For example, rather than paying a monthly 10% commission of $10 in perpetuity on a $100/month product, pay a one-time commission on the $1,200 ACV equal to $120.
ACV is used in a handful of ways by business owners, sales, finance, and revenue teams to make sense and valuate their business and individual customers.
Annual contract value is commonly used when determining commissions and commission frequency. If customers pay monthly recurring fees for your product, rather than paying a recurring commission to the sales rep, you can use ACV to calculate a one-time commission to the rep. For example, rather than paying a monthly 10% commission of $10 in perpetuity on a $100/month product, pay a one-time commission on the $1,200 ACV equal to $120.