SaaS Valuation Multiple Calculator

What is a SaaS valuation multiple?

A SaaS valuation multiple is the ratio between the value of a software-as-a-service business and a financial metric such as Annual Recurring Revenue (ARR) or EBITDA. Because many SaaS companies prioritize growth over current profits, investors often value them using revenue multiples instead of traditional earnings multiples.

In this calculator, the focus is on ARR-based valuation, which can be represented as:

The challenge is choosing a realistic multiple. That number depends heavily on your growth rate, profitability, capital efficiency, and market conditions.

How this SaaS valuation multiple calculator works

The calculator estimates a range for your valuation multiple and then applies it to your ARR. It takes three key inputs:

• Annual Recurring Revenue (ARR): Your contracted, recurring subscription revenue on an annualized basis. Exclude one-time setup fees, professional services, and hardware revenue.
• Annual growth rate (%): Year-over-year revenue growth, typically based on ARR or recurring revenue. A company going from $2M ARR to $3M ARR over 12 months has 50% growth.
• Profit margin (%): Use EBITDA margin or operating margin. Positive margins indicate profitability; negative margins indicate that the business is currently loss-making.

Based on typical 2024 market conditions, higher growth and stronger margins generally support higher multiples. The tool maps your growth and margin inputs to a band of ARR multiples and then calculates an estimated valuation:

• Low case valuation = ARR × lower end of the multiple range
• High case valuation = ARR × upper end of the multiple range

This gives you a directional sense of what similar SaaS businesses might trade for in revenue-multiple terms, not a precise transactional price.

Typical ARR multiples by growth and profitability

The table below illustrates illustrative ARR multiple ranges often seen in private SaaS markets under normal conditions. Actual deals can fall outside these ranges.

Public SaaS companies with strong brands, very low churn, and high net revenue retention often trade at the upper end of these ranges or beyond. Private companies typically sell at a 20–40% discount to comparable public-market multiples.

The Rule of 40 and why it matters

The Rule of 40 is a shorthand metric used by investors to balance growth and profitability. It is defined as:

Investors often view a combined score above 40% as healthy. For example:

• A business growing 50% year over year at -10% EBITDA margin has a Rule of 40 score of 40% (50 - 10). That can still be attractive because the growth is very strong.
• A slower-growing SaaS company at 15% growth and 30% profit margin also scores 45% (15 + 30) and may command solid multiples due to its cash generation and resilience.

Companies with high growth but deeply negative margins, or modest growth with low margins, often receive discounted multiples because investors question the path to sustainable profitability.

Worked example of a SaaS valuation multiple

Imagine a SaaS business with:

• $5,000,000 in ARR
• 40% annual growth rate
• 15% profit margin (EBITDA)

From the table, 40% growth with moderate margins typically suggests an ARR multiple somewhere in the 8–12× range, depending on other qualitative factors (churn, customer concentration, market sentiment).

The implied valuation range would be:

• Low case: $5,000,000 × 8 = $40,000,000
• High case: $5,000,000 × 12 = $60,000,000

The calculator lets you plug in your own ARR, growth, and margin figures to see a similar range tailored to your metrics.

Interpreting your SaaS valuation estimate

When you view the calculator output, keep these points in mind:

• It is a range, not a single “true” value. Real-world deal prices reflect negotiation, timing, and buyer fit.
• Buyer type matters. Strategic acquirers, private equity funds, and early-stage venture investors may all value the same business differently.
• Market cycles shift quickly. In hot markets with low interest rates, multiples expand; in risk-off environments they can compress sharply.
• Quality of revenue is critical. High net revenue retention, low churn, diversified customers, and long contracts typically justify higher multiples.

Other factors that influence SaaS valuation

Beyond growth and profit margin, experienced buyers look at:

• Net revenue retention (NRR): NRR above 110% is usually considered excellent and can support premium multiples.
• Customer concentration: A diversified customer base is safer than relying on a few large accounts.
• Churn and logo retention: Lower churn and longer customer lifetimes increase the durability of ARR.
• Market size and positioning: Serving a large, expanding market with a defensible niche is more attractive than a small or shrinking niche.
• Capital efficiency: How much burn is required to sustain growth? Efficient growth is usually rewarded.
• Scale: Very small SaaS companies often trade at lower multiples than larger, more mature platforms, even at similar growth rates.

Limitations and assumptions of this calculator

This SaaS valuation multiple calculator is intended for educational and planning purposes only. It makes several simplifying assumptions:

• Multiple ranges are based on common industry benchmarks and commentary from recent years, not on a live database of current transactions.
• Results assume a typical B2B SaaS model; vertical SaaS, PLG-heavy products, or usage-based pricing models may see different multiples.
• The tool does not account for balance sheet items such as debt, cash, or preferred equity structure.
• Geography, currency risk, tax environment, and regulatory factors are not modeled but can materially change valuations.
• Numbers do not constitute investment advice, a fairness opinion, or a formal valuation report.

For transaction decisions (buying, selling, raising capital, or granting equity), you should consult professional advisors such as M&A bankers, valuation specialists, or experienced SaaS CFOs.

Multiples and ranges may be updated periodically as market conditions evolve, so consider adding a margin of safety around any output when planning.