SaaS Acquisition Multiple

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whats the average multiple of revenue to acquire a SaaS company?

The average revenue multiple for acquiring a SaaS company typically ranges from 5x to 10x annual recurring revenue (ARR), but this can vary significantly based on key factors:

Key Influencers:

  • Growth Rate: Companies growing >30% YoY often command higher multiples (8x-15x+).
  • Profitability: EBITDA-positive firms may see premiums, especially if combined with growth (Rule of 40 alignment).
  • Size: Smaller firms (<$10M ARR) often trade at 3x-6x, while larger ones (>$50M ARR) can reach 10x-15x.
  • Recurrence: High net revenue retention (e.g., >110%) and low churn boost multiples.
  • Market Conditions: As of 2023, higher interest rates and economic uncertainty slightly compressed multiples compared to 2021 peaks.

Example Breakdown:

  • Early-stage: 3x-6x ARR (sub-$10M revenue, moderate growth).
  • Mid-market: 6x-10x ARR ($10M-$50M revenue, strong metrics).
  • Enterprise: 10x+ ARR (>$50M revenue, predictable growth, strategic buyer interest).

Notes:

  • Strategic buyers (e.g., larger tech firms) may pay premiums for synergies.
  • Multiples are often tied to ARR, not gross revenue, emphasizing recurring business quality.

Data reflects trends up to October 2023. For precise valuation, company-specific metrics and market context are critical.

Chat bySam Selikoff