---
title: "What Is Average Contract Value (ACV)? Definition | ONEGTMLAB"
description: "Average contract value (ACV) is the typical yearly value of a customer contract. Learn how ACV is calculated and why it shapes a go-to-market motion."
canonical: https://www.onegtmlab.dev/glossary/average-contract-value
---

# What Is Average Contract Value (ACV)? Definition | ONEGTMLAB

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GTM Glossary

# Average Contract Value (ACV)

Average contract value (ACV) is the typical annual value of a customer contract, usually calculated as total contract value divided by the number of contract years and averaged across customers.

Also called: ACV, annual contract value, average deal size

## Why it matters

ACV shapes how a company should sell. A low ACV usually needs a low-touch motion, such as self-serve or high-volume inside sales, because each deal cannot support much sales time. A high ACV can justify account executives, longer sales cycles, account-based marketing and custom proposals.

Definitions vary. Some teams say ACV for annual contract value of a single deal, others for the average across all deals, and some exclude one-time fees while others include them. Average deal size is a close cousin that may not be annualized. Whatever the definition, it should be written down and used consistently in plans and reports.

## Example

A company signs three deals in a month: a one-year contract for $24,000, a three-year contract for $90,000 and a two-year contract for $40,000. Annualized, they are worth $24,000, $30,000 and $20,000, so the average contract value for the month is about $24,700.

## Related terms

-   [Annual Recurring Revenue (ARR)](/glossary/annual-recurring-revenue)
-   [Customer Lifetime Value (CLV)](/glossary/customer-lifetime-value)
-   [Sales Cycle](/glossary/sales-cycle)
-   [Total Addressable Market (TAM)](/glossary/total-addressable-market)
-   [Go-to-Market (GTM)](/glossary/go-to-market)

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