Average contract length (ACL) is a time value that represents how long customers typically have a commitment with a particular company. The calculation for ACL is:
Average Contract Length = Total Number of Months of Contracts / Number of Contracts
On the other hand, Average Contract Value (ACV) is a metric that represents a dollar amount over a specified period (usually over a year). ACV breaks down the total value of a customer’s contract into an annual average value.
The formula for average ACV is:
Annual Contract Value = Total Contract Value / Total Years in Contract
For example, a $12 million, 12-year contract has an ACV of $1 million per year.