SaaS Valuation Calculator

‍How to Use Our SaaS Valuation Calculator

Investors and shareholders use your valuation to assess the overall health of your SaaS company.

Here are the steps to calculate the value of your company:

1. Organize Key Financial Statements

Gather key documents and records relevant to the valuation process. Such documents include: 

• Financial statements from the last three years of operation. That includes income statements, cash flow statements, tax returns, and balance sheets.
• The annual recurring revenue (ARR), monthly recurring revenue (MRR), customer lifetime value, and EBITDA.

2. Input the Data

Once you have the data, use our Exitwise valuation calculator to determine your company’s value. Proceed and enter the key figures, which include the ARR for the previous financial year and EBITDA.

The calculator uses an income-based method to determine the value of your SaaS company.

3. Specify the Industry

The next step is to indicate the sector your business operates in, in this case, the SaaS, to help our calculator factor in the industry-specific metrics during the calculation.

4. Generate an Estimate

The last step is to request the exit valuation, which will be sent to your email address. You can use the valuation report to compare it with the EBITDA and revenue multiple ranges and determine whether it has a low, standard, or high valuation based on your industry multiples.

If you want comprehensive valuation insights, consider hiring M&A professionals. 

At Exitwise, we can help you find, hire, and manage the right M&A team, including M&A attorneys, tax advisors, and investment bankers from our network of 4000+ vetted M&A experts.‍

Connect with us today and start the journey towards a successful exit.

How SaaS Company Valuations Are Calculated

Not only do SaaS company valuations reveal the worth of your business, but they also reveal critical insights into opportunities or threats that you may have otherwise not noticed.

Here are the different methods to calculate the SaaS valuation:

1. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) Method: It is the most commonly used valuation method to value a profitable SaaS company.
2.  Revenue Multiple Method: Use this method to see the average revenue multiples for your SaaS industry and how your company compares. It takes private and public. 
3. Discounted Cash Flow (DCF): With this method, you can project the future cash flow of your SaaS business and apply a discount rate to it. You can assume the operating expenses and profit margins will remain unchanged and that the revenue growth rate is a fixed annual percentage. You then apply a discount rate to this future cash flow to get the present value of your SaaS business. It helps value assets or your SaaS business in the long term.
4. LTV to CAC Ratio: Calculate LTV SaaS using customer acquisition cost (CAC) and customer lifetime value (CLTV) to determine yourbusiness’s value.

SaaS Valuation Benchmarks and Multiples

Understanding the SaaS multiples and benchmarks helps you gauge where your company value stands.

Here’s a quick overview of business valuation multiples in the SaaS sector:

EBITDA Multiples

Indicates your company’s profitability and earnings potential. The average EBITDA multiple for profitable SaaS companies is 19.33x.

Revenue Multiples

Shows the total annual income of your SaaS company. The average revenue multiple for SaaS companies is 11.20x.

SDE Multiples

Refers to your total financial benefit from your SaaS business. For instance, in the Financial/Fintech category, the average SDE multiple is 9.2x for companies valued at $2-$3M.

Strategies to Increase Your SaaS Valuation

If you’re planning to exit your SaaS business in the next 2 to 5 years, there are specific improvements that can increase your valuations and attract potential buyers.

1. Increase Revenue Growth: Consider expanding your sales by launching new productions or entering new geographic markets. These are the primary ways to increase your valuation multiples.
2. Reduce Customer Churn: Focus on improving customer retention to increase lifetime value. You can do so through streamlining onboarding, implementing customer referral programs, and improving your products.
3. Improve Key Metrics: Increase the LTV/CAC ratio by improving targeting, optimizing conversions, and implementing upsell strategies. You can increase your valuation and significantly give buyers confidence in your business.
4. Strengthen Competitive Positioning: Offer SaaS products that are unique and most valuable to potential buyers. That means your value might be higher if buyers believe there’s a significant opportunity.
5. Secure Intellectual Property (IP): Secure your IP and have a well-documented source code to distinguish your SaaS business as a premium-valued business.

The best way to get a sense of your SaaS business valuation and to increase it is to speak with an M&A advisor.

At Exitwise, we help you connect with a qualified professional who can accurately value your business and counsel on applicable strategies based on your business's assessment and previous transactions.