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ACV metrics reveal the annual value of customer contracts. Learn how to calculate ACV, avoid common mistakes, and use it to guide smarter business decisions.
Every business wants to grow, but sustainable growth isn't just about getting more customers—it's about getting more value from each one. This is where Annual Contract Value (ACV) becomes your most important tool. Instead of just tracking revenue, ACV helps you focus on increasing the average annual worth of each customer contract. It’s a direct lever for improving profitability. When you understand and work to improve your acv metrics, you can build premium tiers, master upselling, and refine your pricing with confidence. This guide is your playbook for not just calculating ACV, but actively using it to drive healthier, more intentional growth.
If you run a subscription-based business, you’re likely tracking a lot of metrics. But if Annual Contract Value (ACV) isn’t one of them, you might be missing a key piece of the puzzle. Simply put, ACV measures the average annual revenue you get from a single customer contract. It’s a metric that normalizes the value of your customer agreements into a neat, one-year figure, giving you a standard way to compare different deals, regardless of their duration.
Think of it as the yearly pulse of your customer contracts. By calculating ACV, you can get a clearer picture of what each customer is worth to your business on an annual basis. This helps you understand which customer segments are most valuable and where your sales team is finding the most success. It’s a foundational metric that feeds into everything from financial forecasting to sales strategy, and getting it right is a crucial step toward sustainable growth. For more on building a strong financial foundation, check out the latest insights on our blog.
When you calculate ACV, you’re focusing on the recurring revenue a customer brings in. The key is to average the total value of a customer's contract over the number of years in the term. For example, if a client signs a two-year contract worth $20,000, the ACV is $10,000. It’s important to remember that ACV specifically excludes any one-time fees. This means implementation costs, setup fees, or training charges shouldn't be part of your calculation. By stripping out these initial costs, you get a much cleaner view of the ongoing, predictable revenue you can expect from that customer each year.
One of the biggest points of confusion is the difference between ACV and Annual Recurring Revenue (ARR). While they sound similar, they measure different things. ACV looks at the value of a single customer contract on an annualized basis, while ARR gives you a big-picture view of your company's total recurring revenue from all customers. Another common myth is that a higher ACV is always better. While a high ACV is great, businesses with a low ACV can be incredibly successful by focusing on a high-volume, low-touch sales model. The right ACV depends entirely on your business model and who you’re selling to.
For any business with a subscription model, understanding ACV is essential. This metric is a critical tool for forecasting revenue and gauging the overall health of your business. It helps you understand the value of each customer, which in turn informs your sales compensation plans, marketing spend, and customer acquisition strategies. When you know your average ACV, you can make smarter decisions about how much you can afford to spend to attract new customers. Ultimately, tracking and working to improve your ACV is fundamental to building a sustainable and profitable subscription business.
Getting a handle on your Annual Contract Value (ACV) is less about complex math and more about understanding what this metric truly represents: the normalized annual revenue from a single customer contract. It’s a powerful number that helps you gauge the health of your customer relationships and the effectiveness of your sales strategy. When you calculate ACV correctly, you get a clear, standardized view of how much recurring revenue each customer brings in per year. This consistency is key for comparing different types of contracts—whether they’re for one year or five—on an equal footing. Let's walk through the simple formula and the important details you need to get it right every time.
At its core, the formula for ACV is straightforward. To find it, you take the total value of a customer's contract and divide it by the number of years in that contract.
ACV = Total Contract Value (TCV) / Contract Term (in Years)
For example, if you sign a customer to a 3-year contract worth a total of $30,000, the calculation is simple: $30,000 / 3 years = $10,000 ACV. This means the contract is valued at $10,000 per year. This formula helps you standardize revenue across all your contracts, making it easier to analyze sales performance and forecast future income. The goal is to understand the annualized value of each customer agreement, regardless of its total length or value.
To calculate an accurate ACV, you need to be selective about which numbers you include. The key is to focus only on recurring revenue—the predictable income you get from subscriptions year after year.
You should always exclude any one-time fees. This includes things like setup costs, implementation fees, training sessions, or initial hardware purchases. While these charges contribute to your overall revenue, they aren't part of the ongoing subscription value. Including them would inflate your ACV and give you a misleading picture of your company's recurring revenue health. Think of ACV as a measure of a customer's ongoing commitment, not their initial investment. This focus on individual customer value is what makes the metric so useful.
One of the most frequent mistakes businesses make is including one-time fees in their ACV calculation. As we just covered, this will artificially inflate your numbers and skew your financial projections. Always strip out those initial charges before dividing the total contract value by the term length. This is where having an automated revenue recognition system can save you from costly manual errors.
Another potential red flag to watch for is when your ACV and Total Contract Value (TCV) are nearly identical. If this is happening across the board, it could indicate that most of your customers are signing one-year contracts and not renewing. This pattern might signal issues with customer satisfaction or retention, giving you a critical insight into the long-term sustainability of your business model.
In the world of subscription metrics, it’s easy to get your acronyms in a twist. While ACV is a powerful indicator of your company’s health, it doesn’t tell the whole story on its own. Understanding how it relates to other key metrics like ARR, MRR, and TCV is what gives you a truly clear picture of your financial performance. Think of it like this: ACV is one instrument in an orchestra. It sounds great, but you need the whole ensemble to make music. Let’s break down how these metrics play together to inform your strategy.
This is one of the most common points of confusion, but the difference is pretty straightforward. ACV looks at the average annual value of a single customer contract, giving you a sense of what each customer is worth to you per year. On the other hand, Annual Recurring Revenue (ARR) is the big-picture metric. It represents the total recurring revenue you generate from all of your active subscriptions combined over a year. So, while ACV zooms in on individual contract value, ARR zooms out to show the overall scale of your recurring revenue stream.
If you understand the difference between ACV and ARR, this one is a breeze. Monthly Recurring Revenue (MRR) is simply the monthly version of ARR. It measures the total predictable revenue generated from all your active subscriptions in a given month. It’s a fantastic metric for tracking short-term growth and momentum. ACV, in contrast, remains focused on the annualized value of an individual contract. Comparing your ACV to your MRR can help you understand how many new deals you need to close each month to hit your revenue targets.
The key difference between ACV and Total Contract Value (TCV) comes down to time. ACV normalizes a contract’s value into a one-year period, which is great for comparing different types of deals. TCV, however, represents the total revenue you expect from a contract over its entire lifespan, including any one-time fees. For example, if a customer signs a three-year deal for $30,000, the TCV is $30,000. The ACV, however, would be $10,000. TCV is useful for understanding long-term customer commitment and cash flow.
Understanding these distinctions isn't just an accounting exercise—it’s fundamental to building a solid growth strategy. When you track ACV, you get a clear view of your deal quality and the effectiveness of your sales team. Fluctuations can signal market trends or tell you if your marketing campaigns are attracting higher-value customers. When you analyze it alongside ARR and MRR, you get a complete view of your company’s financial health and growth potential. These metrics work together to help you forecast revenue, evaluate performance, and make smarter, data-driven decisions that lead to sustainable growth.
Your Annual Contract Value isn't set in stone. It’s a dynamic metric shaped by a mix of your business decisions and outside forces. When you understand what moves the needle on your ACV, you can be more intentional about growing it. Let's look at the key factors that play a role.
The duration of your customer contracts is one of the most direct influences on ACV. A client who signs a three-year deal will naturally have a higher ACV than one on a simple annual plan. While ACV specifically measures the value over a 12-month period, longer-term commitments often come with larger overall deals, which can average out to a higher annual value. This is why many SaaS companies offer discounts for multi-year contracts—it secures revenue and often points to a healthier, more stable customer relationship. Thinking about how you structure your terms can be a powerful lever for improving this metric.
Your pricing model is the engine behind your ACV. If you offer tiered pricing, customers on your premium or enterprise plans will drive your average ACV up. A strategy focused on acquiring a high volume of users at a low price point will result in a lower ACV. On the other hand, a value-based approach that ties pricing to specific outcomes or usage can lead to a higher ACV, as customers pay more for the greater value they receive. Your ACV acts as a report card for your sales and marketing efforts, showing how effectively you’re communicating the value of your higher-priced offerings.
Who you sell to matters just as much as what you sell. Different customer segments have different budgets and needs, which directly impacts your ACV. For instance, a company targeting small businesses or individual freelancers will likely have a lower ACV and a high-volume, low-touch sales process. In contrast, a business focused on enterprise-level clients will have a much higher ACV, supported by a longer, more hands-on sales cycle. Understanding your ideal customer profile helps you align your product, marketing, and sales strategies to attract the segments that are most profitable for your business model. HubiFi's dynamic segmentation capabilities can help you get a clearer picture of your most valuable customer groups.
Your business doesn't operate in a vacuum. Broader market trends, the competitive landscape, and general economic health all set expectations for pricing and contract value. It’s essential to know where you stand by looking at industry benchmarks for ACV. Are you positioned as a premium solution, or are you competing on price? Comparing your ACV to your Customer Lifetime Value (LTV) also provides critical context, revealing the long-term health of your customer relationships relative to their annual spend. Staying aware of these external factors helps you set realistic goals and make smarter strategic decisions.
Growing your Annual Contract Value is about more than just charging more; it’s about deepening your customer relationships and delivering undeniable value. When you successfully increase your ACV, it’s a strong signal that your customers are growing with you and finding more reasons to invest in your solutions. This isn’t a task for the sales team alone. It requires a coordinated effort across your product, marketing, and customer success departments to create offerings and experiences that customers are happy to pay more for.
The key is to shift your focus from one-time sales to long-term partnerships. Instead of asking, "How can we get a bigger contract today?" start asking, "How can we become so indispensable that our customers naturally expand their engagement with us over time?" This approach leads to healthier, more sustainable growth. By strategically packaging your services, identifying expansion opportunities, and ensuring your best customers stick around, you can systematically raise your ACV and strengthen your company’s financial foundation. Let’s walk through four practical ways to make that happen.
One of the most direct ways to increase your ACV is by creating premium product or service tiers. This strategy allows you to capture more revenue from customers who need advanced features, higher usage limits, or dedicated support. Instead of a one-size-fits-all approach, you can create a clear path for customers to upgrade as their needs become more complex. Your ability to optimize ACV through targeted strategies, like focusing on premium-tier customers, can transform your company’s growth rate. Start by analyzing your current customer data to identify the features that your most successful clients use. Bundle these high-value features into a premium package that solves bigger problems and commands a higher price.
Upselling and cross-selling are essential for expanding the value of existing customer accounts. Upselling encourages customers to upgrade to a more expensive plan, while cross-selling involves offering complementary products or services. The goal isn't to be pushy but to be genuinely helpful. By focusing on understanding your customers’ needs and presenting solutions that add real value, you can drive sustainable revenue growth. Train your customer success and sales teams to listen for cues that a client is outgrowing their current plan or could benefit from another one of your offerings. When done right, it feels less like a sale and more like proactive problem-solving.
You can’t grow your ACV if your high-value customers are walking out the door. Strong customer retention is the bedrock of a healthy ACV, as it ensures your most valuable accounts continue contributing to your revenue year after year. Instead of using a generic support model, you can implement targeted strategies that match each customer’s business value. You can use dynamic segmentation to group customers by their contract value and tailor your retention efforts accordingly. For example, top-tier clients might receive a dedicated account manager and quarterly business reviews, while smaller accounts are supported through excellent self-service resources and automated check-ins. This ensures you invest your resources where they’ll have the biggest impact on your bottom line.
A rigid pricing structure can limit your ACV potential. If customers have to make a huge leap to get to the next tier, they might hesitate or look elsewhere. By offering more flexible pricing models, you can create a smoother growth path that aligns with your customers' own expansion. Consider options like usage-based pricing, add-on features, or hybrid models that allow accounts to grow more organically. A flexible strategy with multiple subscription billing models makes it effortless for customers to scale their investment with you over time. This approach not only captures more revenue but also reduces friction, making it easier for customers to say "yes" to a larger contract.
Your Annual Contract Value is much more than a number to report in a meeting; it’s a powerful tool for shaping your company’s future. Once you have a firm handle on calculating and tracking it, you can start using ACV to inform your most critical business decisions. Think of it as a compass that points you toward sustainable growth. By analyzing your ACV, you can see which customer segments are most profitable, how effective your sales strategies really are, and where you should invest your resources for the best return.
This metric helps you move beyond reactive decision-making and into proactive, strategic planning. Instead of guessing what might work, you can use real data to guide your next steps. Whether you’re refining your product roadmap, structuring sales commissions, or allocating your marketing budget, ACV provides a clear, standardized value that keeps everyone aligned. With accurate data, you can build a smarter, more resilient business. And when your financial data is automated and clean, like with HubiFi’s integrations, you can trust that the strategic plans you build are on solid ground.
Predicting future income can feel like guesswork, but ACV brings a welcome dose of clarity. Because it normalizes contract values into an annual figure, ACV gives you a stable baseline for financial projections. It smooths out the noise from varying contract lengths and one-time fees, allowing you to see underlying trends more clearly. As a critical metric for understanding customer value, ACV is essential for forecasting revenue with greater confidence. This accuracy helps you set realistic growth targets, manage cash flow effectively, and make informed decisions about hiring and expansion. When you know what your average customer is worth each year, you can build a budget and a growth plan you can actually count on.
Are your sales reps closing deals, or are they closing the right deals? ACV helps you answer that question by shifting the focus from the quantity of contracts to their quality. ACV is a crucial sales metric that measures the average annual revenue from a customer, making it an excellent key performance indicator (KPI) for your sales team. By tracking ACV per representative or team, you can identify who excels at landing high-value clients versus those who rely on smaller, lower-margin deals. This insight allows you to refine sales training, adjust commission structures to incentivize higher ACV, and better understand which sales strategies are truly driving profitable growth for the business.
Every dollar you invest in your business should work hard for you, and ACV can help you direct your funds where they’ll have the most impact. A rising ACV might signal that it’s time to double down on the marketing channels that attract high-value customers. A lower-than-average ACV in a certain segment could indicate a need for product improvements. Understanding your ACV gives you a clear picture of the average revenue you can expect from each contract annually. This knowledge is fundamental for making strategic choices about where to allocate resources, whether it’s in product development, marketing campaigns, or expanding your sales team.
Not all customers require the same level of attention. ACV is the perfect tool for segmenting your customer base and tailoring your support strategies accordingly. High-ACV clients are your most valuable assets, and they might warrant a dedicated customer success manager and proactive check-ins. For lower-ACV customers, a more scalable, tech-driven support model could be more efficient. This approach allows your customer success teams to move from generic support to targeted strategies that match each customer’s value. By aligning your efforts with contract value, you can improve retention among your top clients without over-investing resources in smaller accounts, creating a more efficient and effective success program.
Ultimately, tracking ACV is about building a culture of making informed, data-driven decisions. When you consistently monitor this metric, you gain a powerful feedback loop for your entire business strategy. For instance, by observing fluctuations in ACV, you can spot emerging market trends, gauge the success of a new pricing model, or see if a marketing campaign is attracting the right kind of leads. This data empowers you to pivot quickly and confidently. Instead of operating on assumptions, you can use ACV to validate your strategies and ensure every part of your business is working together to acquire and retain high-value customers. Ready to see how clear data can transform your strategy? Schedule a demo with HubiFi to get started.
Tracking your Annual Contract Value isn't just about running a calculation once a quarter. To make ACV a truly useful metric that guides your strategy, you need a consistent and reliable process. It starts with having the right systems in place to collect clean data and ends with reports that your team can actually use to make decisions. When you get this process right, you move from simply knowing your ACV to understanding the story it tells about your business's health and potential. Let's walk through the essential steps to track ACV correctly and turn those insights into action.
Spreadsheets might work when you’re just starting out, but they quickly become a source of errors and wasted time as your business grows. To track ACV effectively, you need tools that can handle complexity and automate the process. While CRMs like HubSpot offer valuable analytics, a dedicated financial data platform gives you a more complete picture. The right tool will pull data from all your systems—your CRM, billing platform, and accounting software—to create a single source of truth. This eliminates manual data entry and ensures your ACV calculations are always based on the most current, accurate information. Look for a solution that offers robust integrations to streamline your workflow.
Your ACV metric is only as good as the data it's built on. Inconsistent data entry can skew your numbers and lead to poor strategic decisions. It’s crucial to establish clear, standardized practices for how your team records contract information. Define what counts as a one-time fee versus recurring revenue and ensure everyone follows the same rules. Your ability to optimize ACV by focusing on high-value customers or expanding existing accounts depends entirely on having clean, reliable data from the start. This discipline pays off by giving you confidence in your metrics and the strategies you build around them.
A dashboard full of numbers is useless if it doesn’t lead to smarter decisions. Your ACV reports should be designed to answer specific questions for different teams. For your sales team, a report might break down ACV by representative to evaluate performance. For your marketing team, it could show ACV by customer segment to identify the most profitable audiences. Effective reporting turns ACV from a simple metric into a powerful tool for strategy formation and forecasting. If you’re not sure where to start, you can always schedule a demo to see how automated reporting can transform your financial insights.
To get a true, real-time view of your ACV, you need to break down the silos between your different software systems. When your CRM, billing platform, and ERP don’t talk to each other, your finance team is left to manually piece together the data. This is not only inefficient but also a major source of errors. Integrating your systems ensures that when a deal is closed in your CRM, the contract value is automatically and accurately reflected in your financial reporting. This provides a seamless flow of information, giving you a clear and immediate understanding of your revenue strategy without the manual reconciliation headaches.
While ACV is an incredibly useful metric, calculating and applying it isn't always straightforward. Many businesses run into roadblocks that can make the metric feel more confusing than clarifying. Common issues often stem from messy data, complex compliance rules, or simply not knowing how to fit ACV into a broader strategy. You might find yourself struggling to pull accurate numbers from different systems or wondering how your ACV stacks up against competitors.
The good news is that these challenges are completely solvable. With the right approach and tools, you can move past the hurdles and start using ACV to make smarter decisions. The key is to break down each problem and address it with a clear, focused solution. From cleaning up your data to ensuring your accounting is compliant, taking these steps will transform ACV from a tricky calculation into one of your most powerful strategic assets.
Inaccurate data is the fastest way to undermine your ACV calculations. When your customer information, contract details, and billing records live in separate, disconnected systems, you’re bound to get conflicting numbers. Manual data entry only adds to the problem, creating typos and errors that skew your results. If your source data is unreliable, your ACV metric will be too, leading you to make strategic decisions based on a faulty foundation.
The best way to fix this is to centralize your data. By using a platform that automatically syncs information from your CRM, billing software, and other tools, you create a single source of truth. This ensures your ACV calculations are based on consistent, up-to-date information. Having seamless integrations between your systems removes the guesswork and manual work, giving you an accurate picture of your contract values.
For subscription-based businesses, revenue recognition isn't as simple as logging a payment. Standards like ASC 606 have specific rules about how and when you can recognize revenue over the life of a contract. Calculating ACV is one piece of the puzzle, but you also have to ensure those numbers align with accounting principles. This can become a major headache for finance teams, who often spend hours manually reconciling sales data with compliance requirements.
To handle this, you need a system built for subscription revenue recognition. An automated solution can correctly allocate revenue over the contract term, ensuring your financial statements are always accurate and compliant. This removes the risk of human error and frees up your team to focus on analysis rather than manual data entry. When your revenue recognition process is automated, you can trust that your ACV figures are both strategically useful and audit-proof.
Once you’ve calculated your ACV, the next logical question is: "Is this number good?" Without context, your ACV is just a figure. Benchmarking helps you understand your performance, but finding the right comparisons can be difficult. Comparing your business to a company with a completely different customer base or pricing model won’t give you meaningful insights.
Start by creating internal benchmarks. Track your ACV over time to see if it’s trending up or down, and calculate it for different customer segments or product lines. This will reveal what’s working within your own business. Once you have a solid internal baseline, you can look at industry reports to see how you stack up. Consistently tracking your annual contract value this way turns it into a reliable indicator of your company’s health and growth trajectory.
Not all customers are created equal. Some bring in significantly more value than others, and identifying your most profitable accounts is essential for growth. However, manually sorting through customers to segment them by contract value is time-consuming and often impractical, especially as your business scales. Without clear segmentation, you might be investing your sales and marketing efforts in the wrong places.
Using ACV to segment your customers helps you focus your resources where they’ll have the greatest impact. By calculating the average ACV for different groups—like enterprise vs. SMB clients or customers in different industries—you can pinpoint your ideal customer profile. This data-driven approach allows you to tailor your marketing campaigns, refine your sales process, and develop retention strategies that cater to your most valuable accounts. You can find more insights on how to use data to drive these kinds of strategic decisions.
Adopting a new system to track ACV and automate your financial processes can feel like a massive undertaking. The technical setup, data migration, and team training all present potential challenges. Many businesses hesitate to make a change because they’re worried about a long and disruptive implementation process. The fear is that the short-term pain of switching systems will outweigh the long-term benefits.
The key to a smooth transition is choosing the right partner, not just the right software. A true partner will guide you through every step, from initial setup to ongoing support. They’ll work with you to understand your unique needs and ensure the solution fits seamlessly into your existing workflows. Instead of just handing you a tool, they provide the expertise to help you succeed. If you’re ready to see how a dedicated partner can help, you can schedule a consultation to discuss your specific challenges.
Understanding your Annual Contract Value is one thing, but using it to actively shape your company’s future is where the real magic happens. ACV isn't just a number to report on; it's a powerful lever for building a more stable and profitable business. When you shift your focus from simply closing deals to closing high-value deals, you create a ripple effect across your organization. It helps you move beyond short-term wins and build a foundation for long-term success. Let’s walk through how you can put your ACV data to work.
Vague goals like "increase sales" won't get you far. Using ACV allows you to set specific, data-backed targets that your team can rally behind, like increasing average ACV by 10% next quarter. Your ability to optimize ACV through targeted strategies, like focusing on premium-tier customers and expanding existing accounts, can transform your growth rate and market position. By setting clear goals based on your ACV data, you turn growth from a hopeful wish into an intentional strategy. You can find more data-driven insights on our blog to help shape your approach.
ACV isn’t just a sales metric—it’s a company-wide indicator of health. When your marketing, sales, and customer success teams are all aligned around increasing ACV, everyone wins. Marketing can attract higher-value leads, sales can prioritize deals with upselling potential, and customer success can work to expand accounts. When you use tools that provide clear, unified data, you’ll get the insights you need to increase ACV and promote long-term growth. Having seamless data integrations ensures every team is working with the same information, pulling in the same direction.
To use ACV effectively, you have to trust your numbers. Understanding and optimizing Annual Contract Value is integral to your company's growth, but it starts with accurate tracking. This means having a clear process for your calculations and ensuring your data is clean. It’s also crucial to look at ACV alongside other key metrics like Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC). This holistic view tells you not just what a contract is worth, but how profitable it is. If you're struggling with accuracy, it might be time to schedule a demo to see how automation can help.
Your ACV is a living metric that tells a story about your business. It’s not a "set it and forget it" number. By observing fluctuations in ACV, you can identify market trends, evaluate the effectiveness of your sales campaigns, and ensure your marketing efforts are leading to higher-value contracts. Is your ACV dipping? It might be a sign that a competitor has entered the market or that your pricing needs a refresh. Is it on the rise? Double down on what’s working. Use these insights to create a feedback loop, constantly refining your strategies to keep your business moving forward.
Why are one-time fees, like setup costs, excluded from the ACV calculation? Think of ACV as a measure of your company's predictable, ongoing health. One-time fees are great for your cash flow, but they don't tell you anything about a customer's long-term value or their commitment to your service. By excluding them, you get a much cleaner and more honest look at the core recurring revenue you can expect from a customer each year. This helps you make more accurate forecasts and better understand the true sustainable value of your contracts.
If my Annual Recurring Revenue (ARR) is growing, why should I also track my ACV? It's a great question because it gets to the heart of strategy. ARR tells you the what—that your total recurring revenue is increasing. ACV tells you the how and the who. A rising ARR could be masking a falling ACV, which might mean you're signing up lots of small customers to replace a few high-value ones who have left. Tracking both gives you a more complete story, helping you see if your growth is coming from healthy, high-quality deals or from a sales model that might not be sustainable long-term.
Is it better to have a high ACV with fewer customers or a low ACV with many customers? There's no single right answer here, as it completely depends on your business model. A company with a high ACV typically has a longer, more hands-on sales process focused on enterprise clients. A low ACV model usually relies on a high-volume, low-touch approach that serves small businesses or individual users. Both can be incredibly successful. The key is to understand which model you're building and align your sales, marketing, and product strategies to support it effectively.
What's the most practical first step I can take to start increasing my company's ACV? Before you overhaul your pricing or build new features, start by talking to your best customers—the ones who already have a high ACV. Ask them what they value most about your service and what other problems they're trying to solve. Their answers are a goldmine. This insight will show you exactly where the opportunities are for creating premium tiers, add-on services, or upsell paths that your other customers will find genuinely valuable.
How does a mid-contract upgrade or downgrade affect a customer's ACV? This is where having a clear and consistent process is crucial. When a customer upgrades or downgrades, you should recalculate their ACV for the remainder of the contract term. For example, if a customer on a $12,000 ACV plan upgrades to a $15,000 plan halfway through the year, you would prorate the change. This ensures your ACV metric remains an accurate reflection of the current annualized value of your contracts, rather than being stuck on the initial deal size.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.