SaaS valuation: what an acquirer is actually pricing
- What assembling it costs in your own time
- $2,730
- Hours to assemble the whole pack
- 36
- Hours a week to be ready in time
- 5
Every figure here comes from the figures you enter and the method stated beside it: your document count, your own hourly worth, your expected price. This site publishes no valuation, no tax position and no legal opinion; what a clause means for your deal is your solicitor's and your accountant's.
A software business is bought for revenue that arrives again next month without anybody selling it again, so a valuation argument here is mostly an argument about how durable that revenue is. The headline multiple is the last step and the least interesting one. What decides it is the quality of the contracts underneath, how much of the revenue leaves each year, and how much of the growth is bought rather than earned. This page explains what the number is built from. It does not tell you what your company is worth, which is your own valuer's job.
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How to evaluate a SaaS company: revenue quality before revenue
Two businesses with the same annual revenue are not the same asset. Annual contracts paid up front, with notice periods and auto renewal, price differently from monthly rolling subscriptions a customer can leave on a Tuesday. A buyer separates committed revenue from usage and services revenue, reads the contract terms behind each line, and checks how much of the total rests on the largest handful of accounts. Do that separation yourself before anybody asks, because the buyer will do it anyway and the version they build without you is always less flattering.
SaaS startup valuation when there are no earnings yet
A company that spends everything it earns on growth has no earnings to apply a multiple to, so the argument moves to revenue and to what it costs to add a customer against what that customer is worth over their life. That is an argument about evidence, not about projections: cohort retention by signup month, the payback period on acquisition spend, and whether the last two quarters actually behaved like the plan. A founder who can produce those from the system rather than from a slide is negotiating; one who cannot is being told a number.
How to value a SaaS company on a multiple, and which multiple
There are two families and they answer different questions. A revenue multiple asks what the top line is worth if the business were run by somebody else; an earnings multiple asks what the business produces today once the owner's own pay is normalised. Smaller software businesses that already run at a profit are usually argued on earnings, and the ones still buying growth on revenue. The number itself comes from what comparable businesses actually changed hands for, which is evidence a valuer assembles, and the adjustments to it are where the real negotiation is.
What to assemble before the conversation starts
The contract set, in full, with terms and renewal dates. Revenue split by committed, usage and services. Retention by cohort rather than as a single blended figure. Customer concentration. The code and its dependencies, including who owns what and which licenses it carries. Security and data handling commitments already made to customers. Each of these is a question a buyer will ask, and each is faster to answer from a record than from memory.
Will it do what you need for SaaS valuation?
Tell us where you are in selling your business and what you are trying to keep track of.
SaaS valuation: common questions
How to value SaaS companies against each other?
On the same definitions, which is the hard part. Two companies quoting annual recurring revenue may count trials, discounts, services and one off fees differently, so the first job is restating both on one basis before any multiple is applied. A buyer does this restatement as a matter of course; a seller who has not done it arrives at the meeting without knowing which number is being argued about.
How are SaaS companies valued by a strategic buyer?
Usually on what the revenue is worth inside their business rather than inside yours: the customers they gain access to, the product gap it closes, the cost they can take out. That is why a strategic buyer can pay more than a financial one and also why they can walk away over something that looks minor, such as a technology choice that does not fit what they already run.
Is valuing a SaaS company different from any other business?
The framework is the same and the weightings are not. Revenue durability and retention carry weight here that customer concentration and equipment condition carry in a trade business. What is genuinely specific is that much of the asset is intangible: the code, its licenses, the data held on customers and the commitments made about it. Those are diligence items that stop deals, and they are worth settling long before an offer.
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Keeping what you make
The checklist is free. Pro is what happens once a buyer is actually asking: the documents go in as records, each request is tracked against the person who made it, and every version carries the date it was shared, so nobody has to remember which copy anybody has.
- Download the pack as a file you can send on
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- Send a document from inside the file rather than from your inbox
- Take a deposit without leaving the record
- Connect QuickBooks or Xero to your account
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