Now that you know what Total Contract Value means, the TCV formula to calculate it, and how it’s different from other important metrics, let’s look at how you can use it to grow your business.

Here are a few examples of key business decisions that can be informed by Total Contract Value:

Revenue forecasting: TCV is an effective method for forecasting revenues and growth based on real sales.

Revenue recognition: TCV can help you make sure that you’re accounting for all of your subscription revenue when making decisions based on projected revenue.

Marketing budget: TCV can give you a better understanding of what effect your marketing channels and campaigns have on growth, helping you decide how to best allocate your marketing budget.

Customer acquisition costs: You can use TCV to get a more accurate measurement of your customer lifetime value and how much you can spend to acquire new customers.

Customer segment comparison TCV can be used to compare customer segments to see which ones are more valuable to your business. You can then focus more of your marketing efforts on these particular customer segments to increase your chances of retaining your most valuable customers.

Subscription mix: You can use TCV to see if it would be more valuable for your business to focus on selling more of one type of subscription rather than another.

Sales pipeline analysis. You can use TCV to evaluate the effectiveness of your sales pipeline, allowing you to optimize your sales process and identify any bottlenecks.

Sales quotas: You can use TCV to help you establish sales quotas and ensure that your sales team is focused on acquiring customers that bring the most value to your business.

Commission plans: You can also use TCV to design effective commission plans for your sales team and ensure your sales team is adequately incentivized to sell the services that generate the most revenue for your business.