Total Contract Value (TCV)
Growth
Industry:
Sector Agnostic
Aliases:
Short Definition
Total Contract Value (TCV) is the full monetary value of a single customer contract over its entire term, including all recurring commitments (annualized and extended) plus any one-time fees like setup or onboarding. It measures the lifetime economic impact of a deal before expansions or churn.
Short Definition
Total Contract Value (TCV) is the full monetary value of a single customer contract over its entire term, including all recurring commitments (annualized and extended) plus any one-time fees like setup or onboarding. It measures the lifetime economic impact of a deal before expansions or churn.
Short Definition
Total Contract Value (TCV) is the full monetary value of a single customer contract over its entire term, including all recurring commitments (annualized and extended) plus any one-time fees like setup or onboarding. It measures the lifetime economic impact of a deal before expansions or churn.
Why it matters for Investors
Deal sizing: Highlights average contract scale to assess sales effectiveness and pricing power.
Pipeline valuation: Aggregates to forecast total revenue from signed deals, aiding growth projections.
Unit economics: Pairs with CAC to evaluate ROI per customer acquisition.
Why it matters for Investors
Deal sizing: Highlights average contract scale to assess sales effectiveness and pricing power.
Pipeline valuation: Aggregates to forecast total revenue from signed deals, aiding growth projections.
Unit economics: Pairs with CAC to evaluate ROI per customer acquisition.
Why it matters for Investors
Deal sizing: Highlights average contract scale to assess sales effectiveness and pricing power.
Pipeline valuation: Aggregates to forecast total revenue from signed deals, aiding growth projections.
Unit economics: Pairs with CAC to evaluate ROI per customer acquisition.
Formula
Practical considerations -
Recurring calculation: Annualize MRR to ARR first (e.g., $1K MRR = $12K ARR), then multiply by term.
Exclusions: Ignore post-contract expansions (track as separate upsell TCV) or variable overages (use committed minimums only).
Multi-year ramps: Include full committed value, even if phased (e.g., Year 1 $10K + Year 2 $15K = $25K recurring).
Discounts: Use net price after any upfront reductions; report consistently across deals.
Formula
Practical considerations -
Recurring calculation: Annualize MRR to ARR first (e.g., $1K MRR = $12K ARR), then multiply by term.
Exclusions: Ignore post-contract expansions (track as separate upsell TCV) or variable overages (use committed minimums only).
Multi-year ramps: Include full committed value, even if phased (e.g., Year 1 $10K + Year 2 $15K = $25K recurring).
Discounts: Use net price after any upfront reductions; report consistently across deals.
Formula
Practical considerations -
Recurring calculation: Annualize MRR to ARR first (e.g., $1K MRR = $12K ARR), then multiply by term.
Exclusions: Ignore post-contract expansions (track as separate upsell TCV) or variable overages (use committed minimums only).
Multi-year ramps: Include full committed value, even if phased (e.g., Year 1 $10K + Year 2 $15K = $25K recurring).
Discounts: Use net price after any upfront reductions; report consistently across deals.
Worked Example
Deal: Enterprise SaaS contract signed Q3 2025
Component | Value | Notes |
|---|---|---|
Monthly Recurring (MRR) | $5,000 | Base subscription |
ARR (MRR × 12) | $60,000 | Annualized recurring |
Contract Length | 3 years | Full term |
Recurring Portion | $180,000 | $60K ARR × 3 |
One-Time Setup Fee | $20,000 | Onboarding services |
Total TCV | $200,000 | $180K + $20K |
(Excludes potential Year 2 ramp to $75K ARR, which would add new TCV upon activation.)
Notes:
Per-deal focus: Calculate individually; average across cohorts for ACV trends.
Currency: Lock in at signing rate for multi-currency deals.
Worked Example
Deal: Enterprise SaaS contract signed Q3 2025
Component | Value | Notes |
|---|---|---|
Monthly Recurring (MRR) | $5,000 | Base subscription |
ARR (MRR × 12) | $60,000 | Annualized recurring |
Contract Length | 3 years | Full term |
Recurring Portion | $180,000 | $60K ARR × 3 |
One-Time Setup Fee | $20,000 | Onboarding services |
Total TCV | $200,000 | $180K + $20K |
(Excludes potential Year 2 ramp to $75K ARR, which would add new TCV upon activation.)
Notes:
Per-deal focus: Calculate individually; average across cohorts for ACV trends.
Currency: Lock in at signing rate for multi-currency deals.
Worked Example
Deal: Enterprise SaaS contract signed Q3 2025
Component | Value | Notes |
|---|---|---|
Monthly Recurring (MRR) | $5,000 | Base subscription |
ARR (MRR × 12) | $60,000 | Annualized recurring |
Contract Length | 3 years | Full term |
Recurring Portion | $180,000 | $60K ARR × 3 |
One-Time Setup Fee | $20,000 | Onboarding services |
Total TCV | $200,000 | $180K + $20K |
(Excludes potential Year 2 ramp to $75K ARR, which would add new TCV upon activation.)
Notes:
Per-deal focus: Calculate individually; average across cohorts for ACV trends.
Currency: Lock in at signing rate for multi-currency deals.
Best Practices
Standardize templates: Use CRM fields for recurring, term, and one-times to auto-populate TCV.
Track cohorts: Group by quarter signed to monitor deal quality over time.
Forecast integration: Roll up TCVs to Gross Bookings, applying win rates for pipeline modeling.
Review quarterly: Audit for consistency (e.g., ramp handling) and flag outliers.
Industry tip: In services, include milestone payments; in hardware, add volume discounts; in marketplaces, focus on committed transaction volumes.
Best Practices
Standardize templates: Use CRM fields for recurring, term, and one-times to auto-populate TCV.
Track cohorts: Group by quarter signed to monitor deal quality over time.
Forecast integration: Roll up TCVs to Gross Bookings, applying win rates for pipeline modeling.
Review quarterly: Audit for consistency (e.g., ramp handling) and flag outliers.
Industry tip: In services, include milestone payments; in hardware, add volume discounts; in marketplaces, focus on committed transaction volumes.
Best Practices
Standardize templates: Use CRM fields for recurring, term, and one-times to auto-populate TCV.
Track cohorts: Group by quarter signed to monitor deal quality over time.
Forecast integration: Roll up TCVs to Gross Bookings, applying win rates for pipeline modeling.
Review quarterly: Audit for consistency (e.g., ramp handling) and flag outliers.
Industry tip: In services, include milestone payments; in hardware, add volume discounts; in marketplaces, focus on committed transaction volumes.
FAQs
TCV vs. ACV?
TCV is total over full term; ACV annualizes it (TCV ÷ years) for yearly comparability.Include renewals?
No—TCV is initial contract only; renewals generate new TCV upon extension.Variable usage?
Base on committed minimum; actual overages hit revenue, not TCV.Ramps or step-ups?
Include full committed amount upfront; activation increases count as expansion TCV.Same as lifetime value (LTV)?
No—LTV estimates total customer spend over relationship (including renewals); TCV is one contract's value.
FAQs
TCV vs. ACV?
TCV is total over full term; ACV annualizes it (TCV ÷ years) for yearly comparability.Include renewals?
No—TCV is initial contract only; renewals generate new TCV upon extension.Variable usage?
Base on committed minimum; actual overages hit revenue, not TCV.Ramps or step-ups?
Include full committed amount upfront; activation increases count as expansion TCV.Same as lifetime value (LTV)?
No—LTV estimates total customer spend over relationship (including renewals); TCV is one contract's value.
FAQs
TCV vs. ACV?
TCV is total over full term; ACV annualizes it (TCV ÷ years) for yearly comparability.Include renewals?
No—TCV is initial contract only; renewals generate new TCV upon extension.Variable usage?
Base on committed minimum; actual overages hit revenue, not TCV.Ramps or step-ups?
Include full committed amount upfront; activation increases count as expansion TCV.Same as lifetime value (LTV)?
No—LTV estimates total customer spend over relationship (including renewals); TCV is one contract's value.
Related Metrics
Commonly mistaken for:
ACV (annual slice only)
ARR (current-year recurring)
Gross Bookings (aggregate of TCVs)
LTV (multi-contract projection)
Related Metrics
Commonly mistaken for:
ACV (annual slice only)
ARR (current-year recurring)
Gross Bookings (aggregate of TCVs)
LTV (multi-contract projection)
Related Metrics
Commonly mistaken for:
ACV (annual slice only)
ARR (current-year recurring)
Gross Bookings (aggregate of TCVs)
LTV (multi-contract projection)
Source of:
Components:
Index