Total contract value (TCV) is the full value of a customer contract over its whole term, combining recurring charges for every year with one-time fees such as setup or training.
A worked example
An example with round numbers. A three-year contract covers 20 seats at $100 per seat per month, plus a $6,000 one-time setup fee. The recurring value is 20 × $100 × 36 months = $72,000, so TCV is $78,000. ARR is $24,000 and MRR is $2,000. Annual contract value (ACV), if you use it, is $24,000 for the recurring part, or $26,000 if you spread the setup fee across the three years; pick one definition and keep it. If the customer later extends the end date by six months, TCV rises by $12,000 while ARR stays the same.
When TCV is the right number
TCV is a bookings measure. It shows how much a signed deal commits in total, which is useful for sales compensation on multi-year deals, for backlog, and for seeing what term length does to a deal. It is the wrong number for growth or retention: a three-year deal books three times the TCV of a one-year deal at the same price, but the business is no bigger. Report TCV next to ARR, never instead of it. And if reps are paid on TCV, decide before it happens how you will treat a multi-year deal that is cancelled or renegotiated in year two. How extensions, cancellations and other mid-term changes move TCV is covered in how subscription amendments work.
In Salesforce
Salesforce has no TCV field. The standard Opportunity Amount sums quantity times sales price on its products and does not factor time into the calculation, so a three-year subscription entered at its annual price reads as one year of value. The standard Contract stores the start date, end date and term in months, but not a value. Teams that report TCV usually add a custom field on the Opportunity or Contract and calculate it with Flow, or rely on a quoting package that multiplies price, quantity and term on each line.
How Kugamon handles it
Kugamon builds term into the line price. Marking a product as a Service adds a term, and the line is priced as price × quantity × term instead of price × quantity, so a 36-month subscription is valued for 36 months on the Quote and the Order. Kugamon adds an Opportunity Amount field that factors the service term in, which the standard Amount does not. With the Subscription Management add-on, the Contract rolls up TCV alongside ARR and MRR, and an Expansion Order released against the Contract co-terms and prorates its lines and updates the Contract.
Related terms
- Annual recurring revenue (ARR)
- Monthly recurring revenue (MRR)
- Amendment
- Co-terming
- Revenue recognition (ASC 606)
Source: www.kugamon.com