Glossary
What is Annual Contract Value (ACV)?
Annual Contract Value (ACV) is the average value of a customer contract per year of its term.
By the forquotez team. Last updated October 13, 2026.
How ACV is calculated
There is no single official definition. Teams calculate ACV in two common ways.
- Recurring only: ACV = total recurring contract value / contract term in years. One-time fees are excluded.
- Including one-time fees: ACV = total contract value / contract term in years. Some teams instead count one-time fees only in the first year.
Neither is wrong. What matters is that everyone in your company uses the same definition, and that you state it when you share the number.
A hypothetical example
This is a hypothetical example. Acme Example Software signs a 24-month contract at $2,500 per month with a $6,000 implementation fee.
- Recurring only: ($2,500 x 24) / 2 = $30,000 ACV.
- Including one-time fees: ($60,000 + $6,000) / 2 = $33,000 ACV.
The same deal produces two different figures. Try both in the TCV and ACV calculator.
Common mistakes
- Mixing definitions. Comparing a recurring-only ACV with one that includes fees distorts rep and team comparisons.
- Treating ACV as ARR. ARR is a company-level run rate. ACV describes one contract.
- Forgetting the term. A large TCV over five years can be a modest ACV.
On a multi-year quote, showing the total alongside the monthly price keeps both sides clear. See multi-year contracts and TCV.
Frequently asked questions
Does ACV include one-time fees?
It depends on the company. Some teams exclude one-time fees and some include them, so always ask which definition is being used.
What is ACV for a one-year contract?
For a 12-month contract, ACV equals the contract value for that year. If you include one-time fees, it equals TCV.
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