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Posted: Thu Jan 02, 2025 10:38 am
If a customer opens multiple contracts with different values and durations, you want to calculate the ACV of each contract, add the values to get the total ACV, and divide that number by the number of contracts.
ACV (multiple contracts) = Total ACV of all contracts / number of contracts
Note that the formula for ACV is not standardized, so the calculation and result may differ for different companies. For example, one company may prefer to calculate the ACV of customers purely on the subscription fee paid, while another company may want to include once-off fees, such as onboarding or installation costs.
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How to calculate ARR
Seeing as ARR and ACV are often connected, it’s worth some tips for running a successful telemarketing business knowing the standardized formula for calculating Annual Recurring Revenue as well.
ARR is the total value of income generated in a year from subscription-based contracts. It includes upgrades and downgrades. The general formula is:
ARR = Monthly Recurring Revenue (MRR) * 12
, where MRR is the monthly income generated from your subscriptions. To incorporate changes to ARR generated by contract upgrades and downgrades, for instance, a more inclusive formula would like:
ARR = ARR at the beginning of the year + ARR gained from new customers + ARR gained subscription upgrades – ARR lost to subscription downgrades – ARR lost to customer churn
Strategies to increase ACV in sales
Now that you’ve calculated the ACV for your customers, how can you use the information to further your business goals? Here are some suggestions for making the most of your ACV results:
ACV (multiple contracts) = Total ACV of all contracts / number of contracts
Note that the formula for ACV is not standardized, so the calculation and result may differ for different companies. For example, one company may prefer to calculate the ACV of customers purely on the subscription fee paid, while another company may want to include once-off fees, such as onboarding or installation costs.
Reporting & analytics in Nutshell
Learn more about Nutshell’s reporting and analytics features
an illustration of a laptop with a green arrow pointing up
How to calculate ARR
Seeing as ARR and ACV are often connected, it’s worth some tips for running a successful telemarketing business knowing the standardized formula for calculating Annual Recurring Revenue as well.
ARR is the total value of income generated in a year from subscription-based contracts. It includes upgrades and downgrades. The general formula is:
ARR = Monthly Recurring Revenue (MRR) * 12
, where MRR is the monthly income generated from your subscriptions. To incorporate changes to ARR generated by contract upgrades and downgrades, for instance, a more inclusive formula would like:
ARR = ARR at the beginning of the year + ARR gained from new customers + ARR gained subscription upgrades – ARR lost to subscription downgrades – ARR lost to customer churn
Strategies to increase ACV in sales
Now that you’ve calculated the ACV for your customers, how can you use the information to further your business goals? Here are some suggestions for making the most of your ACV results: