Contract Value: Definition, Formula & Why It Matters

Every contract tells a story — of promises, pricing, and performance. But if you strip away the legal jargon, what really matters is one number: how much is this deal worth?

That number is your contract value — a metric that sits at the intersection of sales, finance, and legal. It captures not just how much revenue a single agreement brings in, but how it shapes your company’s growth, risk profile, and financial health.

This guide breaks down what contract value really means, how to calculate it properly, and why it’s so central to modern contract management.

What is contract value?

Contract value — or Total Contract Value (TCV) — is the total revenue a business expects to earn from a contract over its full duration.

In simpler terms, it’s the sum of all payments (recurring and one-off) agreed in a contract. That might include:

• Monthly or annual subscription fees (recurring revenue)
• Setup, onboarding, or training fees (one-off costs)
• Discounts, renewals, and upsells over the term

Tracking contract value gives legal, finance, and commercial teams a clear picture of how much each agreement is really worth — and how that feeds into company growth. In fact, measuring and reporting on this metric is critical to modelling revenue and measuring sales efficiency across SaaS and service-based businesses.

Total Contract Value (TCV) vs Annual Contract Value (ACV) vs ARR

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How to calculate total contract value (TCV)

At its simplest, Total Contract Value (TCV) is the total revenue you expect from a contract over its lifetime.

That includes all the recurring payments you’ll receive during the term — plus any one-off fees — minus discounts or credits that reduce what the customer actually pays.

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But in reality, contracts are rarely that simple. Below, we’ll break down what to include, what to leave out, and how to handle common scenarios like discounts, renewals, and usage-based pricing.

1. Identify the contract term

tart by defining how long the customer is actually committed to pay you for.

• Fixed-term contract: e.g. 24 months.
• Rolling or auto-renewing contract: only include the initial committed period, not optional renewals.

Tip: In B2B SaaS, TCV is almost always calculated based on the committed term — not potential renewals or upgrades.

2. Add up the recurring revenue

Multiply your Monthly Recurring Revenue (MRR) or Annual Recurring Revenue (ARR) by the contract length.

• If the price stays the same throughout: £1,000 MRR × 12 months = £12,000
• If the price increases later (ramp pricing): Add up each phase separately, e.g. (£1,000 × 6 months) + (£1,500 × 6 months) = £15,000

3. Include one-off fees

Add any non-recurring fees, such as: implementation or onboarding costs, training or consultancy, hardware, setup, or installation charges. If your contract includes these, they should be counted in your total.

4. Adjust for discounts, credits, and uplifts

Next, factor in commercial adjustments:

• Discounts: A 10% discount on a £15,000 contract brings it down to £13,500.
• Credits: Deduct any service credits that reduce payment.
• Price uplifts: If your contract includes a 5% annual price increase, apply that to each year before summing up.

This gives you a realistic view of what you’ll actually earn, not just the headline rate.

5. Account for usage-based or variable pricing

For consumption-based contracts (common in SaaS and telecoms):

• Use the committed minimum to calculate TCV — not forecasted overages.
• For example, if a customer commits to £500/month of usage for 12 months,
  your TCV = £500 × 12 = £6,000.

If you also expect regular overages, you can calculate an “expected TCV” scenario separately — but keep the committed figure for reporting.

6. Check what not to include

Avoid double-counting by excluding:

• Optional renewals or expansions not yet agreed
• Contingent performance bonuses
• Pass-through costs (if you’re not earning margin)
• Taxes like VAT or sales tax, unless you report TCV on a gross basis

How to gain instant visibility into contract value

Understanding contract value is one thing — managing it efficiently across hundreds of agreements is another.
That’s where Juro helps teams turn contract value into a live, actionable data point.

With Juro’s conditional logic, legal teams can set value-based rules into contract templates.

• High-value contracts automatically trigger legal or finance approval.
• Lower-value, low-risk deals skip review and go straight to signature.
• Clauses can adapt dynamically based on value thresholds — e.g. adding insurance or limitation-of-liability clauses for larger deals.

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This keeps risk under control while allowing sales teams to move faster on routine contracts.

And these benefits continue into post-signature contract management, too. Every contract created in Juro is structured data — not a static document, so you can instantly filter contracts by value, customer, or status.

Juro's ChatGPT integration automates this data retrieval further, allowing you to ask questions around contract value to your contracts directly.

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This functionality makes it easier than ever to track revenue exposure, prep for audits, or identify bottlenecks delaying high-value deals. When raising capital, going through due diligence, or running board reports, that visibility can save weeks of manual work.

Why contract value is such an important metric

Contracts hold a wealth of financial data, but few figures are more revealing than Total Contract Value (TCV).

Tracking TCV tells you how much revenue each agreement contributes, but it also gives visibility into growth, risk, and performance across your customer base. Here’s why it matters.

1. It helps you forecast growth with confidence

Knowing the total value of all active contracts gives finance teams a clear picture of future cash flow and revenue.

It’s how leaders assess whether growth is sustainable, budgets are realistic, and renewal pipelines are healthy. In fast-scaling SaaS or service businesses, TCV is the foundation for accurate revenue forecasting — not guesswork.

2. It strengthens your negotiation strategy

Contract data doesn’t just live in the past, it guides better deals in the future.

By comparing TCV across existing customers, legal and sales teams can see where they’ve discounted too heavily, where pricing held firm, and which terms deliver the most value. This context helps avoid value leakage and ensures you negotiate from a position of data, not instinct.

3. It helps you manage risk and approvals

High-value contracts come with higher stakes: liability, delivery, and reputational risk all scale with the numbers.

Tracking contract value allows legal teams to flag large deals for extra scrutiny, while smaller, low-risk agreements can move faster through the workflow. This helps balance deal velocity with compliance.

4. It gives visibility into your customer portfolio

TCV also reveals which customers or vendors drive the most value for your business.

If 20 per cent of your clients account for 80 per cent of revenue, you can tailor your retention, support, and expansion strategy accordingly. For leadership teams, it’s a clear way to prioritize relationships and allocate resources effectively.

How to manage contract value in Juro

When contract data lives in PDFs or Word docs, calculating TCV means digging through static files and contract management spreadsheets.

In Juro, contracts are built as structured data — meaning fields like MRR, contract term, discount, and setup fee can be tracked automatically.

That means:

• TCV is auto-calculated when a contract is drafted
• Approval workflows can trigger automatically if a deal exceeds a certain value
• You can filter and search by contract value to prioritise high-value deals

So instead of guessing, you know exactly how much each contract is worth and how it contributes to your bottom line. Turn your contracts into live commercial data — book a demo to see how Juro makes tracking contract value effortless.