SaaS Valuations: How to Understand Your Business’s Worth (and Get the Best Exit)

When you’re considering selling your SaaS business, getting an accurate valuation is critical for two reasons.

1. It helps you decide whether now is the right time to sell or if you should wait and focus on growth. When you decide to sell, it’s typically because you have an opportunity to achieve your ideal exit. That means (but is not limited to) getting the sale price you need to finance the next stage of your life, getting the deal structure that works best for your goals, and finding a good steward for your business.
   As a note, it’s recommended that you value your business early and often, even if you’re not thinking of selling for the next 5 years. Knowing your company’s value helps you create a plan to exit.
2. A valuation helps you evaluate any offers you’ve already received. If you’ve already received an offer from a buyer, a proper valuation tells you whether that offer is fair or if you’re leaving money on the table.

In this guide, we’ll walk through how SaaS companies are valued and how to maximize value. We also cover how working with an experienced M&A advisor can help you maximize your exit outcomes by accurately valuing your business within the context of the current market, creating a competitive bidding process, and navigating negotiations.

Table of Contents

How SaaS Companies Are Valued

• Key Factors That Impact Your Multiple

How SaaS M&A Advisors Maximize Exit Outcomes

• Creating Competitive Bidding Environments
• Professional Positioning of Your Metrics
• Deal Structure and Negotiation Expertise
• Beyond Just Price: Maximizing Your Exit Outcomes

Finding an M&A Advisor to Help Sell Your Business

• Our Data-Driven Approach to Advisor Matching
• How We Evaluate Advisors Based on Relevant Experience, Down-Funnel Success & Professionalism
• The Curated Shortlist Process

FAQs

• What multiple should I expect for my SaaS business?
• Does my SaaS business need to be profitable to get a good valuation?
• How do I know if an offer is fair?
• What should I prepare before getting a valuation?

This piece contains quotes from Aaron Solganick, CEO of Solganick & Co., a data-driven investment bank focused exclusively on software and IT service companies. Solganick is one of the advisors within our network that can help you sell your SaaS business. At Axial, we have a network of over 3,000 advisors, along with information on their recent deals. We’ve had several types of SaaS companies contact us to find an advisor for them, including companies in HR tech, GovTech, enterprise software, data analytics, and contact management platforms. These businesses ranged from $3M to $16M in revenue, each with unique positioning challenges and buyer requirements.

If you’re ready to sell your SaaS business, schedule your free exit consultation today.

How SaaS Companies Are Valued

Unlike traditional businesses that are often valued based on EBITDA multiples, SaaS companies are valued using multiples of Annual Recurring Revenue (ARR). This means annual recurring revenue is the main driver of your valuation.

But arriving at your accurate multiple requires both:

• Your company’s specific KPIs and financial data
• Understanding of the current market for SaaS companies like yours

The more financial data you have, the more accurate your multiple will be.

As Aaron Solganick, CEO of Solganick & Co., explains: “If a company gives me their ARR, gross margin, and EBITDA, I can give them a rough estimate. But you want a specific and accurate multiple. The more KPIs and the more financial data I have to work with, the more accurate your valuation will be.”

In 2025, Solganick has been seeing a wide range of ARR multiples. “So far, in my experience, I’ve seen mostly 3x-5x ARR for smaller SaaS companies to 7x-12x for mid to large companies that are showing consistent growth.” And whether your company is valued at 3x or 5x its ARR can make a significant difference in whether you want to proceed with a sale.

Key SaaS Factors That Impact Your ARR Multiple

When determining your multiple, advisors like Solganick look at several factors, both within your business and in the overall market. These include, but are not limited to:

1. Your Company’s Size and Growth Rate

Larger SaaS businesses generally get higher multiples. But growth rate is key, too. SaaS companies with consistent year-over-year growth rates are more likely to get premium valuations. Predictable growth patterns are better than erratic spikes and declines.

There’s a trade-off for SaaS companies between profitability and growth. While having a positive EBITDA is important to many buyers (especially private equity firms), high-growth SaaS companies often prioritize reinvestment over profitability. Buyers recognize this.

As Solganick notes, “Many high-growth software companies are intentionally not profitable because they’re reinvesting heavily back into the business, particularly in R&D and growing top-line revenues.”

2. Your Customer Metrics

For SaaS companies, the key metrics that significantly impact valuations are customer acquisition cost (CAC) and lifetime value (LTV).

Generally speaking, monthly churn rates below 2% for B2B SaaS demonstrate strong product-market fit. A strong LTV:CAC ratio (ideally 3:1 or higher) shows efficient, scalable customer acquisition that buyers want to fund. This is based on the general consensus in the industry and data from The Phoenix Strategy Group and OPEXEngline, which show the value of low monthly churn rates and a strong LTV:CAC ratio.

3. Your Company’s Market Position

Companies with strong competitive advantages, defensible market positions, or leadership in growing niches often achieve premium valuations compared to businesses in crowded, commoditized markets.

4. Current Market Conditions

Companies in high-growth sectors like AI, data analytics, cybersecurity, and advanced applications are more likely to receive higher multiples due to increased buyer demand and strategic value.

Further reading: Key SaaS Metrics to Improve and Maximize the Value of Your Business

Valuation Methods Advisors Use

M&A advisors typically use two complementary methods to arrive at an accurate valuation range:

• Comparable company analysis: Benchmarking your business against similar SaaS companies that are publicly traded or have recently been sold, adjusted for differences in size, growth rate, and profitability.

• Precedent transaction analysis: Examining actual purchase prices from recent sales of comparable software companies. When you work with an M&A advisor that we recommend for you within our network, you’re getting an advisor with industry experience and transaction data from their past clients to conduct this analysis.

While Discounted Cash Flow (DCF) analysis is sometimes used for mature, profitable SaaS companies, revenue multiples provide a more practical framework for most businesses, especially those still in high-growth mode.

How SaaS M&A Advisors Maximize Exit Outcomes

Understanding your valuation is just the starting point of selling your business. Your company’s actual value is ultimately what a buyer is willing to pay for it. This is where working with an experienced M&A advisor specializing in SaaS transactions makes a measurable difference.

M&A advisors can help you achieve better exit outcomes, in terms of final sale price, deal structure, exit timeline, and stewardship.

Data shows that working with an M&A advisor can increase your final sale price anywhere from 6–25%, according to the Quarterly Journal of Finance. Anecdotally, we’ve seen returns higher than that within our network, where over 3,000+ M&A advisors and investment banks work with business owners to get their desired exit.

M&A advisors drive value in several ways, including:

• Creating competitive bidding environments
• Marketing your business towards what buyers value the most
• Negotiating attractive deal structures

Creating Competitive Bidding Environments

One of the most effective ways to maximize your sale price is through competitive bidding. This is where you get several qualified buyers interested in your business. By engaging more interested parties, you create leverage that can be used to maximize your deal outcomes.

As a business owner, you can’t create this process on your own. Here’s why:

• First, you don’t have the time. Based on an internal survey at Axial, M&A advisors save business owners at least 30 hrs a week. A lot of that time is spent creating a competitive bidding environment and managing interested buyers. As a business owner, your time should be spent managing your business and preparing for your exit. Your business can suffer if you’re spending too much time managing the M&A process. Plus, if your key metrics start to dip during negotiations, your valuation multiple will lower as well.

• Second, you don’t have a network of buyers. Even if you had the time, you don’t have the network. That’s why working with advisors who have experience selling SaaS companies is so valuable — they have established relationships with buyers who are actively looking to acquire businesses like yours.

Let’s look at a real example from Solganick & Co. to show how the competitive bidding process unfolds.

• First, Solganick and his team marketed the business to around 300 companies. Some of these companies were already in their network, others they identified through research, matching the type of business they were representing with what buyers were looking for.
• Out of those 300 companies, 80 signed NDAs. When a buyer signs an NDA, that indicates they’re interested in learning more about the company. At Axial, we track signed NDAs to evaluate whether an M&A advisor can garner significant interest for their clients. Learn about what an NDA entails.
• From those 80 NDAs, 16 buyers submitted Indications of Interest (IOIs) after learning about the company’s financials. This means they were interested in potentially making an offer. Learn more about IOIs.

From that list of 16 buyers, Solganick and his team then narrowed the list down to 8 viable buyers who were good strategic fits for their client.

The seller now has 8 buyers to negotiate with before executing a Letter of Intent and closing the deal. Before working with an M&A advisor, they only had one offer.

Rather than negotiating from a position of weakness with a single interested buyer, the advisor created competition that drove up the final sale price and gave the seller leverage throughout negotiations.

Next, let’s focus on the second bullet point — positioning your business towards buyers — as it’s a key part of successfully selling your business.

Professional Positioning of Your Metrics

SaaS businesses have unique characteristics that require specialized knowledge to market effectively. Unlike traditional businesses that might be evaluated primarily on revenue and profit, SaaS companies are valued based on complex metrics like ARR, CAC, LTV, and churn rates.

An experienced SaaS advisor understands how to present these metrics in a way that helps buyers see their value. The value of your metrics doesn’t exist in isolation — it depends heavily on the type of buyer you’re targeting and what they’re looking for in an acquisition.

For example:

• Strategic buyers (larger SaaS companies or tech firms) may be most interested in your customer base overlap, geographic expansion opportunities, or potential for technology integration. An advisor would emphasize metrics that demonstrate market penetration and scalability.

• Financial buyers (private equity firms, family offices) typically focus on cash flow predictability and growth efficiency. For these buyers, advisors would highlight strong LTV:CAC ratios, low churn rates, and consistent revenue growth patterns.

• Independent sponsors and smaller buyers often look for operational improvements and add-on acquisition opportunities. Advisors might emphasize your management team strength, market position, and potential for bolt-on acquisitions.

The key insight is that different buyers value different things. An experienced advisor knows how to tailor the story of your business to resonate with each buyer type, maximizing perceived value without misrepresenting your company.

Further reading: Strategic vs. Financial Buyers: Finding the Right Buyer for Your Exit

Deal Structure and Negotiation Expertise

SaaS transactions often involve complex deal structures, including earnouts based on customer retention, revenue milestones, or product development goals. These structures can significantly impact your actual payout, but evaluating their fairness requires understanding both market norms and what is reasonable for your business.

Your M&A advisor has more insight here based on their experience interacting with dozens of buyers. Plus, they have an objectivity that allows them to evaluate the term more fairly.

An experienced advisor provides several critical advantages during negotiations:

• • Structuring seller-friendly protections: This includes non-interference clauses that prevent buyers from undermining your ability to hit earnout targets, as well as provisions around operational control during transition periods.

• Navigating valuation gaps: When there’s a difference between your expectations and buyer offers, advisors can use creative deal structures like seller financing, equity rollovers, or tiered pricing to bridge the gap while protecting your interests.

• Evaluating earnout terms objectively: Advisors can advise on whether proposed metrics are achievable and fair, ensuring you’re not taking on unnecessary risk for uncertain or unlikely future payments.

Beyond Just Price: Maximizing Your Exit Outcomes

While a premium sale price and a good percentage of cash at close are important, there are other exit outcomes to consider when accepting a deal.

These include:

• Cultural fit and stewardship: If you care about what happens to your employees, customers, and the brand you’ve built, your advisor can help identify buyers who align with your vision for the company’s future. Not all buyers are created equal, and the highest offer isn’t always the best choice.

• A deal that fits your exit timeline: Some buyers can close faster than others. If timing is critical — perhaps you’re starting a new time-sensitive project or dealing with a personal situation requiring liquidity — it might be worth accepting a slightly lower offer from a buyer who can move quickly and with certainty.

• Your post-sale involvement: Whether you want to stay involved as an advisor, maintain board representation, or completely exit the business, your advisor can structure the deal accordingly. This includes negotiating employment agreements, consulting arrangements, or equity rollovers that give you continued upside.

The difference between a good exit and a great exit often comes down to having an experienced guide who understands both SaaS market dynamics and your specific goals.

Finding an M&A Advisor to Help Sell Your Business

At Axial, we’ve developed a data-driven approach to matching SaaS business owners with M&A advisors with relevant experience and proven track records in the software industry.

Our Data-Driven Approach to Advisor Matching

At Axial, we have over 3,000 M&A advisors and investment banks within our network. Rather than providing generic referrals, we analyze each advisor’s transaction history within our network to understand their specific expertise. For SaaS businesses, this means identifying advisors who understand software industry valuations, have experience with SaaS-specific due diligence requirements, and maintain relationships with buyers who actively acquire software companies.

We examine factors like the advisor’s experience with businesses of your size, their familiarity with your technology stack or market vertical, and their success rate in closing SaaS transactions at competitive valuations.

How We Evaluate Advisors Based on Relevant Experience, Down-Funnel Success & Professionalism

Our evaluation process considers three critical factors:

• Relevant deal experience: We prioritize advisors who have successfully sold SaaS businesses similar to yours in terms of size, business model, and market. This includes analyzing the total number of relevant deals they’ve completed on Axial, with priority given to transactions from the last 24 months. That way, you’re getting an advisor with recent and relevant experience.

• Down-funnel success: We track each advisor’s ability to convert buyer interest into actual offers. We do this by tracking metrics like the number of qualified bids generated per transaction, the percentage of deals that reach the LOI stage, and their success rate in closing transactions once under contract.

• Professionalism and reputation: We consider feedback from both buyers and sellers who have worked with each advisor, including responsiveness scores, communication effectiveness, and overall satisfaction ratings from previous transactions.

The Curated Shortlist Process

We start by pairing you with an Exit Consultant who understands your business and exit goals. Your consultant will leverage Axial’s network of over 3,000 M&A advisors and investment banks to create a shortlist of 3–5 candidates specifically qualified to handle your SaaS business sale.

Each advisor on your shortlist will have demonstrated expertise in SaaS transactions, proven ability to generate competitive interest, and strong professional reputation within our network. We provide detailed insights about each candidate to help you evaluate your options and prepare for advisor interviews.

Our Exit Consultants have successfully connected SaaS owners with advisors who specialize in understanding software industry dynamics, including the shift toward private equity interest in the sector and the growing demand from strategic buyers seeking to expand their technology capabilities.

Schedule your free Exit Consultation today.

FAQs

What Multiple Should I Expect for My SaaS Business?

SaaS valuations typically range from 3x-5x ARR for smaller companies to 7x-12x for larger, high-growth businesses. However, your specific multiple depends on several factors including company size, growth rate, profitability, customer metrics (churn, CAC/LTV), and market position.

Companies in high-demand sectors like AI, cybersecurity, and data analytics often command

premium multiples. The best way to understand where your business falls in this range is to work with an M&A advisor who has recent experience selling companies similar to yours — they’ll have access to comparable transaction data and can benchmark your business accurately.

Does My SaaS Business Need to Be Profitable to Get a Good Valuation?

Not necessarily. Many high-growth SaaS companies are intentionally not profitable because they’re reinvesting heavily in R&D and customer acquisition to drive top-line revenue growth.

That said, the Rule of 40 provides a useful benchmark: if your revenue growth rate plus EBITDA margin equals or exceeds 40%, you’ll typically command a market or above-market valuation.

For example, a company growing 35% annually with 10% EBITDA margins (totaling 45%) would be viewed favorably by buyers.

Private equity firms tend to place more emphasis on profitability than strategic buyers, who may prioritize growth and market position. Your advisor can help you understand which buyer types are the best fit based on your current financial profile.

How Do I Know if an Offer Is Fair?

The only way to truly know if an offer is fair is to create a competitive environment where multiple qualified buyers are evaluating your business. A single offer — even if it seems reasonable — gives you no leverage and no benchmark for comparison.

Working with an M&A advisor who can market your business to 50–300+ qualified buyers creates the competition necessary to maximize your sale price and improve deal terms. In

Solganick & Co.’s recent example, they took a business from one offer to eight viable buyers, significantly improving the seller’s negotiating position. Additionally, advisors have access to precedent transaction data from similar deals, allowing them to benchmark offers against what comparable SaaS companies have actually sold for in recent months.

What Should I Prepare Before Getting a Valuation?

Before approaching an advisor for a valuation, you should:

• Organize your financials: Gather at least 3 years of financial statements, tax returns, and monthly/quarterly performance data. If you’re still using basic accounting systems like QuickBooks, consider upgrading to more robust software that can properly track SaaS-specific metrics.
• Track your key metrics: Have clear data on your ARR, MRR, customer churn rate (both logo churn and revenue churn), CAC, LTV, gross margins, and growth rates. The more comprehensive your KPI data, the more accurate your valuation will be.
• Document your customer base: Prepare information on your customer concentration (how much revenue comes from your top 5-10 customers), customer acquisition channels, and any long-term contracts or commitments.
• Understand your market position: Be prepared to discuss your competitive advantages, market trends, and growth opportunities. Advisors need context beyond just the numbers to position your business effectively.

The good news is that experienced M&A advisors can help you organize and prepare this information if it’s not already in order. In fact, one of the valuable services advisors provide is helping you get your financials and metrics into buyer-ready format before going to market.