Total Contract Value (TCV) is the aggregate value expected from all active contracts.

‍

How is TCV calculated?

TCV is the sum of all of the active, non-annualized contract values and reflects non-recurring revenue in the total value. Additionally, TCV reflects mid-contract changes by changing the total contract value to reflect the expansion or contraction.

‍

1.  TCV from ARR

For example, if a customer pays $150,000 ARR for 3 years, the ARR is $150,000, while the TCV is $150,000 * 3 years, or $450,000.

‍

2.  TCV with Non-Recurring Revenue

Let’s take a customer that has purchased the following products:

‍

‍

TCV is $18,000 + $6,000 + $1,000, or $25,000. Note that TCV includes the amount for the non-recurring Starter Implementation product. SaaSGrid allows you to enable or disable including non-recurring revenue products in TCV.

‍

3.  TCV with Mid-Contract Change

For contracts that have a co-termed change during an active contract, TCV will be adjusted to count the revenue of the change, not the run rate. With contractions and expansions in ARR, we can represent the total changes in TCV. 

For example, if a customer starts with 10 users seats for $100 per month for 12 months, the TCV will be equivalent to 10 seats * $100 * 12 months, or $12,000. If the customer decides to purchase 10 more user seats after 4 months on the same contract, the expansion amount will be $10 seats * $100 * 8 remaining months, or $8,000. This $8,000 expansion plus the original $12,000 yields a total TCV of $20,000. We can represent the ARR change and the TCV in the following way

‍

‍

The ARR change May indicates the change in the contract value, and the TCV expands by the ARR expansion amount.Use SaaSGrid to discover what segments, products, and industries drive your sales growth and see where you're winning customers. Talk to us here and see how we can help you with insights into TCV and more!