Contractor Finance Glossary
What is Annual Contract Value (ACV)?
Also called: ACV
Annual contract value is the revenue a single recurring contract produces in one year, normalized to twelve months so agreements of different lengths and billing cadences can be compared on equal footing.
ACV turns a pile of service agreements with different terms and payment schedules into one comparable number per contract. A three-year agreement billed monthly and a one-year agreement billed upfront can finally be measured against each other, which is what you need to see whether your recurring base is growing.
For a contractor, ACV is only half the picture. The recurring fee is the floor; the repair and project work the agreement pulls through is where most of the margin lives. Track ACV to size the recurring base, then track total value per customer to see what that base is really worth.
How it is calculated
ACV = total contract value divided by the contract term in years. For a month-to-month agreement, ACV = monthly fee times 12. It counts the recurring fee only and excludes one-off pull-through work.
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