MCV is an important metric for measuring the revenue that a company can expect to receive from a customer in a given month.
Monthly Contract Value (MCV) is the total value of a customer contract in a SaaS (Software as a Service) company over a one-month period. It is a measure of the revenue that the company can expect to receive from a customer in a given month.
To calculate MCV for a SaaS company, you will need to know the following:
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Average revenue per user (ARPU): This is the average amount of money that each customer pays per month.
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Number of months in the contract: This is the length of the customer's contract, in months.
Once you have these numbers, you can use the following formula to calculate MCV:
MCV = ARPU / Number of months in the contract
For example, if a SaaS company has an ARPU of $100 and a customer contract that lasts for 12 months, the MCV for each customer would be:
MCV = $100 / 12 = $8.33
This means that the company can expect to receive $8.33 in revenue from each customer in a given month.
It's important to note that MCV is a forward-looking metric that reflects the revenue that the company is expected to receive in the future, based on the terms of its customer contracts. Actual MRR (Monthly Recurring Revenue) may differ from MCV due to changes in the number of paying customers and the ARPU.
MCV vs MRR vs ARR: What’s the Difference?
| Metric | Definition | Best Used For | SaaS Example |
| MCV (Monthly Contract Value) | Average monthly revenue expected based on the total contract value and duration | Understanding the monthly value of longer-term contracts | A £12,000 annual deal equals £1,000 MCV |
| MRR (Monthly Recurring Revenue) | Actual recurring revenue generated each month | Tracking current revenue performance and retention trends | £950 MRR reflects real-time recurring income post-churn |
| ARR (Annual Recurring Revenue) | Total recurring revenue projected over 12 months | High-level revenue forecasting and investor reporting | £1,000 MRR x 12 = £12,000 ARR |
Monthly Contract Value (MCV) FAQs
When should SaaS companies track MCV?
MCV is most useful during deal reviews, sales forecasting, and when structuring long-term contracts. It helps teams assess the true monthly value of complex, multi-year agreements.
Does MCV apply to usage-based or variable pricing models?
MCV works best with fixed, recurring contract terms. For usage-based or consumption models, revenue can fluctuate, so pairing MCV with actual usage data or trailing MRR provides a more complete revenue picture.
How does MCV support purchasing decision alignment?
Understanding MCV ensures your sales team and the buyer are clear on the revenue implications of their purchasing decision. It helps frame ROI discussions and positions your solution within the prospect’s financial planning.
Is MCV used by finance teams, or just sales?
Both. Sales uses MCV to qualify and prioritise deals, while finance relies on it for revenue forecasting, investor reporting, and growth modelling—especially in subscription-based businesses.
What metrics should be used alongside MCV?
For complete revenue visibility, SaaS teams should track MCV alongside:
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MRR (Monthly Recurring Revenue) — for actual monthly revenue
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ARR (Annual Recurring Revenue) — for yearly revenue projections
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Churn and Expansion rates — to account for customer lifecycle changes
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