If you’re running a SaaS business, sooner or later you’ll ask the big question: What is my company worth? Investors, founders, and even acquirers rely on SaaS valuation multiples to answer that.
Unlike traditional businesses, SaaS companies are valued differently because of their recurring revenue, growth potential, and scalability. Let’s break down what valuation multiples mean, and how you can calculate them for your own company.
What Are SaaS Valuation Multiples?
A valuation multiple is simply a ratio — it compares your company’s value to a key financial metric. In SaaS, the most common multiples are tied to revenue because profits often come much later.
For example, if your SaaS company is valued at $10 million and your annual recurring revenue (ARR) is $2 million, your valuation multiple is:
Valuation Multiple = $10M ÷ $2M = 5x ARR
That means your business is valued at 5 times its annual recurring revenue.
Common SaaS Valuation Multiples
While ARR multiples are the most common, investors look at several factors:
- Revenue Multiple (ARR or MRR)
- Most popular in SaaS.
- Formula: Company Valuation ÷ ARR.
- EBITDA Multiple
- Used when a SaaS business is profitable.
- Formula: Company Valuation ÷ EBITDA.
- Gross Profit Multiple
- Especially relevant for SaaS with high infrastructure costs.
- Formula: Company Valuation ÷ Gross Profit.
Factors That Affect SaaS Multiples
Not all SaaS companies with the same ARR get the same valuation. Multiples depend on:
- Growth Rate – Faster-growing SaaS companies command higher multiples.
- Churn Rate – Low churn = higher predictability = higher valuation.
- Market Size & Competition – Bigger market = more investor interest.
- Profitability Margins – Even if not profitable, efficiency matters.
- Revenue Quality – Enterprise contracts vs. small monthly subscriptions impact valuation.
For instance, two SaaS companies with $2M ARR might be valued differently:
- Company A (growing 100% YoY, churn 5%) → 8x ARR
- Company B (growing 30% YoY, churn 15%) → 3x ARR
How to Calculate Your SaaS Valuation Multiple
- Find your current valuation (this could be from a fundraising round, acquisition offers, or estimated market comps).
- Choose the metric (ARR, MRR, or EBITDA).
- Apply the formula:
👉 Valuation Multiple = Company Valuation ÷ Metric
Example:
- ARR = $3M
- Valuation = $15M
- Multiple = 15 ÷ 3 = 5x ARR
Use Our Free Valuation Multiple Calculator
Doing this math by hand is simple, but comparing across ARR, MRR, and EBITDA multiples can get messy. That’s why we built a SaaS Valuation Multiple Calculator at SaaSBuffer.com — just plug in your numbers and see instant multiples.
Final Thoughts
Valuation multiples aren’t just about numbers — they reflect how investors see your growth, stability, and future potential. By tracking your ARR, churn, and growth rate alongside multiples, you’ll get a clearer picture of your company’s true worth.
Whether you’re fundraising, considering an acquisition, or just benchmarking, knowing your SaaS valuation multiples gives you a serious edge.