Total Contract Value (TCV) Calculator
Calculate the Total Contract Value (TCV) for subscription agreements. TCV is the total revenue a company expects to receive from a customer over the entire term of a contract. It includes all recurring charges and any one-time fees.
Enter the Monthly Recurring Revenue (MRR), the total Contract Duration in months, and any One-time Fees. The calculator will provide the Total Contract Value. Ensure consistent currency units.
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Understanding Total Contract Value (TCV)
What is TCV?
Total Contract Value (TCV) represents the sum of all expected revenue from a single customer contract over its entire lifespan. It's a key metric in subscription and SaaS businesses, providing a long-term view of customer value.
TCV Formula
The calculation is straightforward:
TCV = (Monthly Recurring Revenue * Contract Duration in Months) + One-time Fees
This includes both predictable recurring income and any upfront or one-time charges.
Why is TCV Important?
TCV is used by sales teams to understand the total potential deal size, by finance for forecasting and valuation, and by leadership to assess business growth and customer lifetime value (LTV) potential. It contrasts with metrics like Monthly Recurring Revenue (MRR) or Annual Recurring Revenue (ARR), which focus solely on the recurring component.
TCV Calculation Examples
Click on an example to see the step-by-step calculation:
Example 1: Simple 12-Month Subscription
Scenario: A customer signs up for a 12-month plan with no setup fee.
1. Known Values: MRR = $100, Duration = 12 months, One-time Fees = $0.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($100 * 12) + $0 = $1200 + $0
4. Result: TCV = $1200.
Conclusion: The total value of this contract is $1200 over 12 months.
Example 2: 24-Month Contract with Setup Fee
Scenario: A customer signs a 24-month contract including an initial setup fee.
1. Known Values: MRR = $250, Duration = 24 months, One-time Fees = $500.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($250 * 24) + $500 = $6000 + $500
4. Result: TCV = $6500.
Conclusion: This contract is valued at $6500 in total.
Example 3: 3-Year Agreement with No Upfront Cost
Scenario: A long-term, 3-year contract without any initial fees.
1. Known Values: MRR = $50, Duration = 36 months (3 years * 12 months/year), One-time Fees = $0.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($50 * 36) + $0 = $1800 + $0
4. Result: TCV = $1800.
Conclusion: The total value over the 3-year term is $1800.
Example 4: High One-Time Fee, Shorter Term
Scenario: A contract with a significant one-time implementation fee and a 6-month service term.
1. Known Values: MRR = $300, Duration = 6 months, One-time Fees = $2000.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($300 * 6) + $2000 = $1800 + $2000
4. Result: TCV = $3800.
Conclusion: The high upfront fee makes the TCV substantial even for a short contract.
Example 5: Annual Payment Plan (Convert to MRR)
Scenario: A customer pays $1200 annually for a 2-year contract, no other fees.
1. Known Values: Annual Recurring Revenue = $1200. First, convert to MRR: MRR = $1200 / 12 months = $100. Duration = 24 months (2 years * 12). One-time Fees = $0.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($100 * 24) + $0 = $2400 + $0
4. Result: TCV = $2400.
Conclusion: The total value is $2400. (Note: If inputs are in ARR, convert to MRR first).
Example 6: 18-Month Contract with Discounted MRR
Scenario: A customer gets a special MRR rate for an 18-month contract.
1. Known Values: MRR = $150 (after any discounts), Duration = 18 months, One-time Fees = $150.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($150 * 18) + $150 = $2700 + $150
4. Result: TCV = $2850.
Conclusion: The TCV reflects the total value including the slightly lower monthly rate.
Example 7: Contract with No Recurring Revenue
Scenario: A contract consists only of a one-time project fee, with no ongoing service (simplified example).
1. Known Values: MRR = $0, Duration = 1 month (or any minimal duration to represent the period covered), One-time Fees = $5000.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($0 * 1) + $5000 = $0 + $5000
4. Result: TCV = $5000.
Conclusion: TCV captures the value even if it's purely non-recurring revenue.
Example 8: Long-Term, High MRR Contract
Scenario: A major client signs a 5-year contract.
1. Known Values: MRR = $1000, Duration = 60 months (5 years * 12), One-time Fees = $750.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($1000 * 60) + $750 = $60000 + $750
4. Result: TCV = $60750.
Conclusion: Long-term contracts with high MRR result in very high TCVs.
Example 9: Short Contract, Low Value
Scenario: A customer signs up for a short trial period that converts to a paid plan, but the contract term is initially short.
1. Known Values: MRR = $10, Duration = 3 months, One-time Fees = $0.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($10 * 3) + $0 = $30 + $0
4. Result: TCV = $30.
Conclusion: TCV is low for short, low-MRR contracts.
Example 10: Contract with Multiple One-Time Fees (Summed)
Scenario: A contract has a setup fee and a separate training fee.
1. Known Values: MRR = $500, Duration = 12 months, One-time Fees = $300 (setup) + $200 (training) = $500.
2. Formula: TCV = (MRR * Duration) + One-time Fees
3. Calculation: TCV = ($500 * 12) + $500 = $6000 + $500
4. Result: TCV = $6500.
Conclusion: Sum all applicable non-recurring charges for the One-time Fees input.
Important Considerations for TCV
Variable Fees: This calculator assumes fixed MRR. Contracts with variable usage-based fees require forecasting to estimate TCV, which is outside the scope of this simple tool.
Discounts: Ensure the MRR entered is the *net* monthly amount after any applied discounts for the duration of the contract.
Renewals: TCV typically only includes the initial contract term. Potential revenue from renewals is often considered separately (e.g., in Customer Lifetime Value - LTV calculations).
Frequently Asked Questions about TCV
1. What does TCV stand for?
TCV stands for Total Contract Value.
2. What is the difference between TCV, MRR, and ARR?
MRR (Monthly Recurring Revenue) is the predictable revenue per month. ARR (Annual Recurring Revenue) is MRR multiplied by 12. TCV is the *total* value of a contract over its *entire* duration, including both recurring revenue (MRR * Duration) and any one-time fees.
3. Does TCV include one-time fees?
Yes, TCV includes any one-time, non-recurring fees such as setup fees, implementation fees, or training fees charged as part of the initial contract.
4. Does TCV include variable fees?
Generally, simple TCV calculations like this one do *not* include variable usage-based fees because they are difficult to predict accurately at the start of the contract. More complex TCV forecasts might include estimated variable usage.
5. Why is calculating TCV important?
TCV is important for understanding the full potential value of a customer relationship over the contract term, helping sales teams prioritize deals, aiding financial forecasting, and contributing to business valuation.
6. What happens to TCV if a contract is renewed?
TCV is typically calculated for the *initial* contract term only. Revenue from renewals would contribute to a new TCV calculation for the renewal term or be factored into Customer Lifetime Value (LTV).
7. How do discounts affect TCV?
The MRR value you use for the calculation should be the net amount after any discounts applied for the duration of the contract. TCV is based on the actual expected revenue.
8. What units should I use for the inputs?
Use consistent currency units (e.g., USD, EUR, GBP) for MRR and One-time Fees. The duration must be in months.
9. Can TCV be zero or negative?
TCV can be zero if both MRR and One-time Fees are zero (a contract with no value). It should generally not be negative unless you are accounting for refunds or significant credits upfront, which is uncommon for standard TCV calculation.
10. Is this calculator suitable for all types of contracts?
This calculator is best suited for contracts with a fixed monthly recurring fee, a defined term in months, and clear one-time fees. It is less suitable for purely usage-based, evergreen (no defined end date), or highly complex contracts.
