TCV, ACV, iACV…What’s the Difference?

Post author:iwiizkiid
Post published:03/11/2023
Post category:Kelvin / Non-Technical
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Post last modified:03/11/2023
Reading time:3 mins read

If you’re in sales you’ve likely heard the abbreviations, TCV, ACV and iACV…but maybe you’re unsure of what they mean. In this article I will explain what each abbreviation means.

TCV

TCV = Total Contract Value

Total Contract Value or TCV is a metric that is used to show the total value of a customer’s contract across a period of time, usually a duration of three years but it could be less or more. TCV includes all recurring revenue and other fees that may be associated with a product or service sold through the contract. TCV is a metric used primarily by Software as a Service (SaaS) companies to determine their revenue.

There is a formula associated with calculating the TCV:

Total Contract Value (TCV) = Monthly Recurring Revenue x Contract Term Length) + One Time Fees

ACV

ACV = Annual Contract Value

Annual Contract Value or ACV is a metric that is used to show the annual value of a customer contract. This is another metric used by SaaS companies or subscription-based companies.

There is a formula associated with calculating the ACV:

ACV = Total Years in Contract / Total Contract Value (TCV)

iACV

iACV = Incremental Annual Contract Value

Incremental Annual Contract Value or iACV is a metric used to show the additional revenue generated from existing customers usually on an annual basis. iACV is often associated with upsell, cross-sell motions as well as contract renewals.

There is a formula associated with calculating the iACV:

Incremental Annual Contract Value (iACV) = Current Year ACV – Previous Year ACV

An Example of TCV, ACV and iACV Working Together

A customer has a 3-year contract worth £100,000 (TCV), there ACV is £33,333 and they’ve decided to renew the contract for another 3 years with the addition of a few new license tiers for their product. The renewal and therefore TCV for the next three years is £130,000 which means that the iACV is £10,000 per year.

Tags: Annual Contract Value, Business, iACV, Incremental Annual Contract Value, SaaS Metrics, Sales, TCV, Total Contract Value, What is iACV, What is TCV

iwiizkiid

Kelvin is a Cyber Security professional with years and experience working with organisations in different verticals, both large and small. He enjoys contributing to the Network Wizkid knowledge base and he also creates technical content. Kelvin enjoys learning new things and often does this by working on achieving new technical certifications. He holds many professional certifications and academically, he has achieved a Bachelors and Master's degree in both Computer Networks and Cyber Security.