Total Contract Value (TCV)

TCV is the full dollar value of a customer contract from start to finish. Every recurring payment, every one-time fee, everything. A customer signs a 2-year deal at $2,000/month with a $3,000 setup fee? The TCV is $51,000. No annualising, no normalising. Just the total committed amount.

How to calculate TCV

TCV = (Monthly Recurring Revenue × Contract Length in Months) + One-Time Fees

Or more simply: add up everything the customer will pay over the life of the contract. If there's a discount in year two, include the discounted amount. If there's an onboarding fee, include that too. TCV captures the complete picture.

For month-to-month subscriptions without a fixed term, TCV isn't particularly useful since there's no committed contract length. In those cases, ACV or LTV are better metrics.

When TCV is useful

TCV matters most for SaaS businesses that sell annual or multi-year contracts. It tells you two things that ACV doesn't.

First, cash flow visibility. A $120,000 TCV on a 2-year contract tells you more about upcoming cash flows than knowing the ACV is $60,000. Especially if the contract is paid annually upfront, that's $60,000 landing in your account on day one.

Second, customer commitment. A customer who signed a 3-year contract at $150,000 TCV is more committed (and likely stickier) than one paying month-to-month at the same annual rate. Contract length is itself a retention mechanism.

TCV vs ACV

TCV is the total. ACV is the annualised slice. TCV includes one-time fees. ACV typically doesn't. For a detailed comparison of when to use each, see TCV vs ACV.

In our experience, most SaaS businesses need both numbers but reach for them at different times.

Sales teams often celebrate TCV because the numbers are bigger. Finance teams prefer ACV because it normalises for contract length and makes period-over-period comparisons cleaner. Both perspectives are valid. You'll want both metrics in your reporting.