SaaS ACV Bookings calculation
Hello, Could you help me get my heads around the concept of ACV/ARR?
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Are 'ACV' and 'ACV Bookings' the same concept?
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I understand ACV is 'TCV divded by the term of contracts' and also is a good proxy of ARR such that we can compare ACV and ARR of SaaS company.
But lets say today is March 2024 and Customer A contract will end at April 2024.
TCV for customer A at the start of term was 'expected' to be $10 mil and the total term was 4yrs(So it began at May 1st 2020).
My question is Isn't it weird to say Customer A's ACV is $2.5 mil given that we have only 1 month left for this contract.
So How should we calculate ACV in March 2024?? -
In the same situation, Is it right to exclude $0.8 mil ($2.5 mil * 4/12, assuming there has been no up-sell and pricing here) from 2024 ARR if we know that Customer A already decided not to extend the contract?
I was told that we should not include revenues stemming from less-than-a-year contract in ARR. But I was wondering the criteria for 1 year is as of 'remainder' or 'at the start of term'
TIA
2. ACV is just TCV/term of contract, doesn't really matter at what point in time, if you care about the remaining term of contract you would use a different measurement
3. Assuming 2024 ARR is as of Dec then yes you would exclude it from the ARR calculation entirely, most of the time ARR is defined as MRR*12 and since that customer will have churned by December they will not be in '24 ARR
Term of congrats meaning of a 3 year contract, divide TCV by 3 right
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