SAAS VALUATION
Start with the multiple, not the answer.
Valuation is ARR multiplied by a multiple. Put the multiple on the page so you can change it.
THE CORE MATH
ARR times the multiple.
MRR × 12 gives ARR. ARR × your chosen multiple gives enterprise value.
EXAMPLE
$50,000 MRR at a 4× ARR multiple
$50,000 MRR is $600,000 ARR. At a 4× multiple, that produces a $2.4M enterprise-value scenario before any net debt or cash adjustment.
- ARR
- $600,000
- ARR multiple
- 4×
- Enterprise value
- $2.4M
READ THE RANGE
Run a range.
Different buyers will pay different multiples. Change the spread to see the range around your base case.
Enterprise valueARR multiplied by the selected multiple
Equity valueEnterprise value minus net debt, plus net cash
Rule of 40Annual growth plus EBITDA margin for context
QUESTIONS
SaaS valuation questions
How is a SaaS business valuation calculated?
A simple revenue-multiple approach multiplies annual recurring revenue by an ARR multiple. The result is enterprise value. Subtract net debt, or add net cash, to estimate equity value.
What is the difference between enterprise value and equity value?
Enterprise value represents the operating business before its financing structure. Equity value is what remains for owners after net debt is subtracted. Net cash increases equity value because it is a negative net debt balance.
Why should I choose the ARR multiple myself?
Multiples differ by company size, growth, retention, margins, buyer type, and market conditions. Showing the selected multiple makes the estimate easier to challenge and adjust than hiding it behind a black box.
What is the Rule of 40?
The Rule of 40 adds annual revenue growth and profit margin. It is a quick context metric for balancing growth with profitability, not a valuation formula by itself.
Is this a formal business valuation?
No. It is a scenario model based on your inputs. A transaction valuation also considers diligence, customer concentration, retention, contract terms, working capital, and buyer demand.