Software Contract Value Calculator
Table of contents
What data do I need?What do the results of the software contract value calculator mean?FAQsA lot of software companies struggle with estimating their budget, especially their annual contract value (ACV). That's where our software contract value calculator steps in, helping you calculate your annual and total contract value in no time at all. With just a few clicks, you will know how much money you will make on every contract!
What data do I need?
To calculate the contract value, you will need to provide the following data:
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Retail price: the regular monthly price of one subscription for one user.
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Seats: number of users who will be paying for access to the software.
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Discount: perhaps you want to give your customers a discount if they buy a package of 10 seats or more? Enter the percentage discount in this field, or specify a fixed discount amount, like $50, in the Discount amount field.
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Contract duration: for how long will the customer pay the monthly subscription cost - a month, half a year, or a few years?
What do the results of the software contract value calculator mean?
Here is a description of each of the results the software contraction value calculator provides:
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Discounted price: this is the monthly price of one subscription for one user after the discount – make sure to take a look at it.
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Monthly cost: it's calculated as the discounted price multiplied by the number of seats. It is the amount of money you'll receive each month.
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Annual cost: this is the annual contract value. This is the amount of money you will make each year on this customer's subscription.
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Contract value: this is the TCV or total contract value. It's the total that you will make considering the contract's duration – if the contract exceeds a year, it will be higher than the ACV.
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What is difference between ACV and TCV?
ACV and TCV give information about the contract value regarding different lengths of time. ACV (annual contract value) represents the worth of a contract after one year. TCV (total contract value), on the other hand, measures the total revenue at the end of the contract.
How do I calculate annual contract value?
To calculate the annual contract value:
- Write down the number of years in the contract.
- Write down the total value of this contract.
- Divide the total value by the number of years.
- The result is the annual contract value.
What is the ACV of a $15 monthly subscription?
$180. To calculate the annual contract value of a $15 monthly subscription, simply multiply the monthly subscription value by 12. The result is the total revenue earned after a year of subscription.
Why is annual contract value important?
Annual contract value (ACV) is a crucial metric to measure revenue from any customer's contract. ACV averages the contract value over a year. This way, you can know which of your customers' contracts have the largest revenue in the long term.