What is the formula for ACV?

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Multiple Choice

What is the formula for ACV?

Explanation:
ACV is the yearly value of a contract, so you need to convert monthly revenue into annual revenue. Multiply the price per employee per month (PEPM) by the number of workers served (WSE) to get the monthly revenue, then multiply by 12 to annualize it. The result is PEPM × WSE × 12. Because multiplication works in any order, PEPM × WSE × 12 gives the same value as WSE × PEPM × 12. If you left out either the number of employees or the monthly rate, or the 12 months factor, you wouldn’t get the annual contract value. For example, PEPM × 12 gives annualized revenue per employee, but you’d still need to scale by how many employees to get the total ACV.

ACV is the yearly value of a contract, so you need to convert monthly revenue into annual revenue. Multiply the price per employee per month (PEPM) by the number of workers served (WSE) to get the monthly revenue, then multiply by 12 to annualize it. The result is PEPM × WSE × 12. Because multiplication works in any order, PEPM × WSE × 12 gives the same value as WSE × PEPM × 12.

If you left out either the number of employees or the monthly rate, or the 12 months factor, you wouldn’t get the annual contract value. For example, PEPM × 12 gives annualized revenue per employee, but you’d still need to scale by how many employees to get the total ACV.

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