Total contract value
tee-see-VEE
The total dollar value of a contract over its entire term, including subscription fees, services, and one-time charges.
TCV is the total value of a deal across the full contract period. A three-year deal at $100k per year with $30k in professional services has a TCV of $330k. A one-year deal at $50k has a TCV of $50k.
TCV matters because it represents the total commitment from the customer. A $500k TCV deal is a bigger commitment than a $500k ACV deal on a one-year contract, even though the annual run rate is the same. The multi-year deal locks in revenue, reduces churn risk, and improves cash flow if paid upfront.
Be careful comparing TCV across deals with different terms. A three-year, $300k TCV deal has the same ACV as a one-year, $100k TCV deal. But the three-year deal is a stronger signal of customer commitment and a worse signal of ACV growth if you are counting on price increases at renewal.
Examples
A multi-year enterprise deal.
Three-year subscription at $200k/year with 5% annual escalators. Year 1: $200k. Year 2: $210k. Year 3: $220.5k. Plus $50k implementation. TCV: $680.5k. ACV: $200k (year 1).
TCV versus ACV in a board presentation.
The sales team closed $10M in TCV last quarter. The board asks for the ARR impact. Answer: $3.5M in new ARR. The difference comes from multi-year contracts counted at full TCV but only contributing one year to ARR.
A customer negotiates for a longer term.
The customer wants a 15% discount. The AE counters: 'I can offer 10% if you commit to three years instead of one.' The customer agrees. ACV drops from $100k to $90k but TCV goes from $100k to $270k. Guaranteed revenue triples.
In practice
Read more on the blog
Frequently asked questions
What is the difference between TCV and ACV?
ACV is the annualized value of the recurring subscription. TCV is the total value across the entire contract including all years and one-time charges. A three-year deal at $100k/year with $20k in services has $100k ACV and $320k TCV.
Should sales teams be compensated on TCV or ACV?
Most companies pay commission on ACV to prevent reps from inflating numbers with long-term contracts at lower annual rates. Some companies pay a bonus for multi-year commitments on top of ACV commission. The compensation structure should encourage the deal terms the company values most.
Related terms
The annualized value of a single customer contract. Tells you about individual deal size, while ASP tells you the average across all deals.
The annualized value of your active subscription contracts. The heartbeat metric of every SaaS business.
The conditions in a sales agreement: length, auto-renewal, termination rights, payment schedule, and SLA commitments.
A signed deal. The total value of a customer contract at the time they commit to buy. Not the same as revenue.
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