Private SaaS companies are most often valued as a multiple of annual recurring revenue. The formula is simple; the hard part is the multiple, which moves with growth, retention, profitability, size and market conditions. This calculator turns your ARR and a multiple range into a valuation range, shows what your stake is worth, and flags the metrics buyers and investors look at.
How it works
Valuation = ARR × multiple. With $1.2 million of ARR, a 3× to 6× range gives $3.6 million to $7.2 million. Use a range, not one number: two credible buyers can disagree by that much.
The multiple is your assumption. Look at recent transactions and published market data for companies of a similar size and growth, and expect multiples for small, private companies to be well below those of large public ones.
Growth and retention move the multiple most. Faster growth, net revenue retention above 100% and a healthy Rule of 40 score (growth plus profit margin) all justify the higher end. Churn, customer concentration and founder dependence pull it down.
Very small SaaS businesses are often valued on a multiple of profit (seller's discretionary earnings) instead of ARR. If the business is small and profitable, check both methods.
A worked example
A company with $1.2 million ARR, 40% growth, a −5% margin and 105% net retention, valued at 3× to 6× ARR, is worth $3.6 million to $7.2 million, with a midpoint of $5.4 million. A 30% stake is worth about $1.62 million at the midpoint. Its Rule of 40 score is 35, just short of 40.
Questions people ask
How are SaaS companies valued?
Usually as a multiple of ARR for growing companies, or a multiple of profit for small, mature ones. Investors adjust the multiple for growth, retention, margins, market size and risk.
What is a typical SaaS ARR multiple?
It changes with market conditions and varies hugely by company quality and size. Rather than rely on one figure, look at recent comparable deals and published market reports for businesses like yours.
Why does net revenue retention matter so much?
Above 100%, existing customers grow revenue on their own, so future revenue is more predictable and cheaper to earn. Buyers pay more for that.
Is valuation the same as what I'd receive in a sale?
No. Deal terms such as earn-outs, debt, cash, fees, taxes and preference shares change what founders actually receive.
Should I use ARR or revenue?
ARR, if most revenue is recurring. One-off services and setup fees are usually valued at a much lower multiple, or excluded.