What is ACL (Average Contract Length)?

The Average Contract Length (ACL) metric calculates the typical length of a customer agreement. It's commonly used in the software-as-a-service industry and is determined by dividing the total time of all customer agreements by the number of agreements. This metric helps to understand the duration of the customer commitment to a product or service, it can give an insight on how well a company is holding on to its customers and predictability of its revenue. In general, a longer ACL implies more predictable revenue, as customers are committed for a longer period, while a shorter ACL could indicate a higher rate of customer turnover and less predictable revenue.