How to Value Your SaaS Business in 2025
By John Edwards | March 13, 2025
This article is part of our Valuation by Business Model series, where we explore what sets SaaS businesses apart in the valuation process. For a deeper dive into valuation techniques, check out our guide on valuing online businesses. Get a free valuation for your SaaS business by filling out the form on our homepage.
Market Overview in 2025
The global SaaS market reached a valuation of $247 billion in 2025, with projections estimating a rise to $908.21 billion by 2030, driven by a compound annual growth rate (CAGR) of 18.7% from 2024 to 2030. Marc Andreessen’s famous assertion that "software is eating the world" remains relevant, as SaaS funding has surged nearly sevenfold over the past decade, outpacing overall venture capital growth by six times. This boom reflects expanding use cases and penetration into diverse industries.
At SaaS Valuation App, we’re witnessing growing demand for enterprise software and SaaS solutions as businesses leverage data insights and cloud flexibility for a competitive edge. Gartner forecasts global cloud service spending to hit $723.4 billion in 2025, up 21.5% from $595.7 billion in 2024, signaling a robust market. Organizations now average 130 SaaS apps, with net growth up 18% this year. For the latest trends, explore our recent report.
Valuation Methods for SaaS Businesses
Valuing a SaaS business in 2025 remains a hot topic, blending art and science. Entrepreneurs and investors debate whether to use Seller Discretionary Earnings (SDE), Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), or revenue multiples. High revenue multiples for unicorn SaaS firms contrast with modest earnings multiples for smaller entities, reflecting diverse investment profiles tied to size and growth.
For businesses under $5 million, SDE is common, adding back owner salaries to reflect true earnings. Larger firms shift to EBITDA, while growing SaaS companies often rely on revenue multiples due to upfront growth investments. The choice depends on owner reliance, revenue growth (over 50% year-over-year), and annual revenue (above $2 million). Our proprietary model at SaaS Valuation App analyzes 80-100 factors, including financials, customer acquisition, and operations, to determine the right multiple.
Key SaaS Metrics and Multiples
SaaS valuations typically range from 4x to 10x annual profit (SDE), influenced by metrics like business age, owner involvement, and growth trends. A track record of 2+ years earns a premium, while low owner dependency boosts appeal. Consistent, modest growth attracts investors, with churn, Lifetime Value (LTV), and Customer Acquisition Cost (CAC) being critical. An LTV/CAC ratio of 3 is ideal, ensuring marketing ROI.
For businesses under $2 million, expect 5.0x to 7.0x multiples, while those over $2 million range from 7.0x to 10.0x. The Rule of 40 (growth rate + profit margin ≥ 40%) guides healthy SaaS firms, though new companies may prioritize growth over margins. Our data from recent sales shows monthly customer churn averaging 4.7% (43.9% annualized), with higher rates in competitive niches.
Boosting Your SaaS Value
To maximize your exit value, reduce churn with tactics like improved onboarding, outsource development and support for a 0.5x-0.75x multiple boost, and secure intellectual property (e.g., trademarks). Document your source code and time major product updates 3-6 months before sale to enhance earnings. Avoid discounting annual plans, as buyers adjust for unserved portions.
Enhance salability with detailed financials, documented procedures, and customer metrics (MRR, churn, LTV, CAC) via tools like ChartMogul. Outsourcing and new feature development can leverage higher offers. Ready to sell? Contact SaaS Valuation App for a confidential valuation and expert exit strategy advice.
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