Enter the monthly recurring revenue, the contract term (months), and the contract fees to determine the total contract value (TCV)
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TCV Formula
The following formula is used to calculate a total contract value.
TCV = MRR * CL + CF
- Where TCV is the total contract value ($)
- MRR is the monthly recurring revenue from the contract ($/month)
- CL is the contract length (months)
- CF is additional contract fees ($)
To calculate the total contract value, multiply the monthly recurring revenue by the contract length, then add additional contract fees.
TCV Definition
What is a total contract value?
A total contract value is defined as the monthly recurring revenue multiplied by the contract length plus any additional contract fees. It describes the total value of a contract signed by two companies.
Example Problem
How to calculate total contract value?
- First, determine the total monthly recurring revenue for the contract.
For this example, the contract is worth a total of $5,000.00 per month.
- Next, determine the length of the contract in months.
In this case, the originally planned time is for the contract to run 12 months.
- Next, determine any additional contract fees.
In this example, there is $5,000.00 for completing the full length of the contract.
- Finally, calculate the total contract value using the formula.
Using the formula above, the TCV is calculated to be:
TCV = MRR * CL + CF
TCV = $5,000 * 12 + $5,000
TCV = $65,000.00
