Learn how investors assess SaaS businesses and calculate a realistic valuation using metrics like ARR, churn, and growth rate.
Track metrics such as Annual Recurring Revenue (ARR), Monthly Recurring Revenue (MRR), churn rate, customer acquisition cost (CAC), and customer lifetime value (LTV). These indicators help gauge business health and growth potential.
Common approaches include revenue multiples, discounted cash flow (DCF), and earnings-based methods. Many investors favor ARR multiples for their simplicity in the SaaS sector.
Compare your metrics with public and private SaaS companies of similar size and growth. Market benchmarks provide context for selecting the right valuation multiple.
High growth rates and strong customer retention typically command premium valuations. Investors will look for steady expansion and low churn to justify higher multiples.
Keep financial statements and key metrics well-documented. A clean data room with accurate information speeds up due diligence and instills confidence in your valuation.
Our free valuation tool combines these methodologies with AI-driven insights. Enter your metrics to get an instant valuation range and downloadable report.
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