Why SaaS Companies Should Not Rely on Total Contract Value (TCV) as a Primary Metric

Dave Kellogg argues that SaaS companies using Total Contract Value (TCV) instead of Annual Recurring Revenue (ARR) as their primary metric can artificially inflate growth figures through extended contract terms and discounting, masking underlying business weakness. TCV bookings enable accounting manipulation similar to market-cap inflation during industry bubbles, ultimately mortgaging future revenue and cash collections. Companies making non-prepaid multi-year deals face significant collection risk and may never realize the promised value.