The Real Cost of Annual Contract Value (ACV) Based Pricing

If you are paying a percentage of your project portfolio for your documentation management software, you are paying too much.

Pricing Models

Software as a service (SaaS) has revolutionized the software industry, making it easy and affordable for you to roll out a software solution to your entire company. In the SaaS world, pricing models are only limited to creativity. Standard pricing models include monthly or annual payments based on a flat-rate, tiered feature-sets, per user, usage-based, and the list goes on and on. Saas models are designed to be easy to understand and budget for, as well as flexible enough to grow with you.

While still prevalent in the construction industry, one method that is not standard in the SaaS world is pricing based on your ACV. Keep reading to learn why you are overpaying if this is how your subscription fee is calculated.

$ Cha-Ching $

Many project management software companies base their subscription fees on the value of your annual contract portfolio. We are not sure how software provides additional value to a contractor simply based on their ACV, but we do see huge value to the software provider! Pricing based on your ACV is highway robbery, period.

The cost of creating or maintaining software is the cost – and it has nothing to do with your ACV. When purchasing materials for a project, you purchase those materials based on the base-price of the commodity at the time of need, not based on the size of your construction project, right? You may receive a volume discount, a percentage deducted from the order to account for quantity, however in this case, the item’s base price does not change. Your discount is applied after the base price of the Item x Quantity calculation is performed. With percentage based ACV pricing, the base price is determined from the size of your annual portfolio. So, you book the business, your software provider takes a percentage of your top-line revenue…wait, what??

Let’s look at a real-world example. We’re going to do a little math here so stick with me. You have a smaller project valued at $5M. It’s an easy job, however, to complete it you have to rent or buy specialized equipment from overseas which will cost $3M. This leaves $2M of operating budget to complete the project, which needs to include your margin, unless you are in the habit of working for free. On a % of ACV pricing model, your software cost is based on the $5M booked business. Still with me? Frustrated?

Software Should Enhance Your Operations, Not Impact Your Bottom Line

Software is a tool and should be affordable. Once up and running, you should never think about your software solution again. It should run in the background, supporting your organization and processes. When you must re-evaluate and re-budget annually based on how much money you’ve booked, that becomes impossible and your tool is now a distraction.

It’s Time to Take a Stand – Pay a Fair Price, Based on Real Usage

Just because it’s always been doesn’t mean it should always be. Keep your hard-earned money and pay for what you actually use. ConDoc’s pricing scales with you. Pay for the number of projects and feature-set you need, no more, no less. Take a stand and make the move to ConDoc, where you can focus on your operation, not your software costs.

Are you ready for a change? ConDoc, Construction Documentation (and Pricing) Simplified!