SaaS Valuation Calculator
Estimate what a subscription business is worth. Enter ARR, growth, margin and churn to see an ARR multiple, a valuation range and your Rule of 40 score.
Inputs
Result
$9,300,000
estimated enterprise value
$1,200,000 of ARR growing 80.00% with a Rule of 40 score of 65 scores an estimated 7.8× ARR multiple, or roughly $9,300,000 — realistically a range of $6,510,000 to $12,090,000.
- ARR multiple
- 7.8×
- Estimated value
- $9,300,000
- Conservative (−30%)
- $6,510,000
- Optimistic (+30%)
- $12,090,000
- Rule of 40 score
- 65
- Net revenue retention implied
- 88.00%
Formula
- Rule of 40 = growth rate % + profit margin %
- base multiple = 3× ARR, adjusted for growth, margin, Rule of 40 and churn
- enterprise value = ARR × adjusted multiple
- valuation range = value ± 30%
Methodology
SaaS companies are valued on a multiple of ARR, and the multiple is driven mostly by growth. Public SaaS has traded between roughly 4× and 12× forward revenue in recent years, with private deals below $5M ARR usually landing between 2× and 6×.
The Rule of 40 — growth rate plus profit margin — is the shorthand buyers use to reward companies that are either growing fast or genuinely profitable. A score of 40 or more supports a premium multiple; well below 40 compresses it.
Churn and net revenue retention adjust the result in both directions. Retention above 100% is worth a real premium because the revenue base compounds without new sales.
This is a directional model, not an appraisal. Actual valuations also reflect market conditions, customer concentration, team, TAM and deal structure — get a professional valuation before transacting.
These are modelling estimates based on standard SaaS metric definitions. Real results depend on your billing data, contract terms and accounting treatment, so reconcile against your finance system before reporting numbers externally.
Example calculation
- A company has $1.2M ARR, 80% growth, an 80% gross margin, −15% net margin and 12% annual churn.
- Rule of 40: 80 + (−15) = 65, comfortably above the 40 threshold.
- The model scores a multiple of about 6.1×, giving roughly $7.3M of enterprise value.
- A sensible negotiating range would be about $5.1M to $9.5M.
Frequently asked questions
What multiple do SaaS companies sell for?
Small SaaS businesses under $1M ARR typically trade at 2-5× ARR, growing mid-market companies at 4-8×, and best-in-class high-growth businesses well above that. Growth rate is the biggest single driver.
What is the Rule of 40?
Growth rate plus profit margin. A company growing 60% while losing 20% scores 40, as does one growing 20% at a 20% profit — both are considered acceptable trade-offs between growth and efficiency.
Does profitability matter more than growth?
Since 2022 buyers have weighted efficiency far more heavily than in the zero-rate era. Growth still dominates the multiple, but unprofitable growth with a long CAC payback is discounted.
How does churn affect valuation?
Heavily. High churn means revenue must be re-earned each year, so acquirers discount it. Net revenue retention above 110% is one of the strongest multiple-expanding metrics there is.
Is this calculator a formal valuation?
No. It is a directional model built on public benchmarks. Real valuations depend on diligence, customer concentration, contracts, team and market conditions.
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