SaaS Multiples: A Guide for Business Owners (2026)

When you’re discussing valuation ranges for your SaaS company, you’re going to be speaking in terms of your ARR multiple, such as 5x or 3x ARR. To give you an idea of what’s common in the industry, we go over the data below and include insights from a top SaaS M&A advisor on average ARR multiples by company size.

But when you’re selling your SaaS business, you want an accurate and market-ready valuation range. This requires working with an M&A advisor who has the right experience to understand your business and what buyers will ultimately pay for it.

At Axial, we connect SaaS business owners with M&A advisors who have the deal experience and buyer networks to maximize exit outcomes. We’ve worked with SaaS companies across different verticals — including HR tech platforms, GovTech solutions, enterprise software, data analytics tools, and contact management systems — with revenue ranging from $3M to $16M.

Each had unique positioning challenges: some needed advisors who understood government procurement cycles, others required expertise in selling recurring revenue models to strategic buyers, while others needed guidance on whether to position as vertical-specific solutions or horizontal platforms.

If your company is at $1M EBITDA or more, and you’re looking to start the M&A process, you can schedule a free exit consultation. We’ll learn about your business and your exit goals, then help you find the right M&A advisor with relevant experience selling companies like yours.

In this post, we look at:

• What are SaaS ARR multiples?
• Current SaaS multiples
• What determines your SaaS multiple?
• How to achieve your ideal exit with an M&A advisor

What Are SaaS ARR Multiples?

At its simplest, your SaaS company’s value is your annual recurring revenue (ARR) multiplied by a specific number. That multiplier is your valuation multiple.

For example, if your company generates $5 million in ARR and receives a 6x multiple, your business is worth approximately $30 million. Change that multiple to 4x, and you’re looking at $20 million instead. That $10 million difference matters, not just in final price, but in the type of deal you’ll get from a buyer.

Unlike business owners in industries like HVAC or dental practices — where selling often means retirement — most SaaS founders view exits differently. They’re typically not at the retirement age. They’re thinking about raising growth capital or merging with a larger company to accelerate expansion. Many SaaS owners maintain equity in the combined company, staying on in active roles while positioning themselves for a “second bite of the apple” when the combined entity eventually sells to a larger acquirer.

Getting an accurate valuation is crucial because it sets expectations for both you and potential buyers, helping determine whether current market conditions align with your exit goals. It also prevents you from accepting offers that undervalue your business.

That’s why accuracy is key, and getting an accurate valuation requires industry insights and analysis of your company’s metrics. As Aaron Solganick told us in our interview, “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.”

Current SaaS Multiples

The SaaS market has stabilized after the volatility of 2020–2023. Here’s what we’re seeing now:

• Public SaaS Companies: According to SaaS Capital’s index, the median public SaaS company trades at approximately 6.7x–7.0x current run-rate annual revenue as of mid-2025. This represents a recovery from the three-year low of 5.5x but remains well below the 2021 peak of 9.8x.

• Private SaaS Companies: Private companies typically trade at a discount to their public counterparts. Current data shows private SaaS companies selling at multiples ranging from 3x to 10x ARR, with the median around 4.8x for bootstrapped companies and 5.3x for equity-backed companies.

Solganick has been seeing multiples ranging from “3x–5x ARR for smaller SaaS companies to 7x–12x for mid to large companies that are showing consistent growth.” That’s a wide range, and understanding where your company falls requires looking at the factors that drive these valuations.

What Determines Your SaaS Multiple?

To determine your SaaS multiple, M&A advisors analyze your company’s performance across several key dimensions, including:

• Company size
• Growth rate
• Profitability and the rule of 40
• Customer retention
• Gross margins
• Customer acquisition economics
• Customer concentration risk
• Market position and timing

Understanding these factors helps you see where your company stands — and where you can improve before going to market.

Company Size

Larger companies command higher multiples. This “size premium” reflects the fact that bigger businesses are typically more stable, have proven their business model at scale, and attract a wider pool of buyers.

As Solganick explained, “If you’re at $5 million or $10 million in ARR, your multiple will be several points lower than a company at $50 million or $100 million in ARR. Generally, for every $20 million increase in ARR, you gain a point or two on your revenue multiple.”

According to Flippa’s 2025 analysis, private SaaS company multiples typically range from 3x to 10x ARR, with the specific multiple heavily influenced by company size and growth rate.

Similarly, Jackim Woods & Co. reports that median valuation multiples vary significantly by company size, with larger companies consistently commanding premium multiples.

Solganick has been seeing multiples ranging from “3x–5x ARR for smaller SaaS companies to 7x–12x for mid to large companies that are showing consistent growth,” with the highest-performing larger companies occasionally reaching 10x–15x multiples.

Growth Rate

Your company’s growth trajectory significantly impacts valuation. Buyers pay premiums for businesses showing strong, consistent growth because it indicates market demand and scalability.

According to SaaS Capital’s 2025 survey of over 1,000 private B2B SaaS companies, the median growth rate is 25%. However, companies growing above 40% annually often receive premium multiples in the 8x–10x range, while those with low-teens growth and negative margins tend to sit in the low-to-mid single digits.

Profitability and the Rule of 40

While SaaS companies don’t need to be profitable to command strong multiples, the market is increasingly focused on the balance between growth and profitability. 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.” This is acceptable when growth justifies the investment.

This brings us to the Rule of 40, a metric that originated in Silicon Valley. The rule states that if a SaaS company’s revenue growth rate plus its EBITDA margin equals or exceeds 40%, it will typically receive a market or above-market valuation multiple.

For example:

• A company growing 40% year-over-year with break-even profitability meets the Rule of 40

• A company with 25% growth and 15% EBITDA margins also qualifies (25% + 15% = 40%)

Companies that exceed the Rule of 40 threshold demonstrate they can balance growth and profitability effectively, making them attractive acquisition targets that command premium valuations.

Customer Retention

Two companies with the same ARR aren’t worth the same if one is bleeding customers while the other is growing accounts. That’s why Net Revenue Retention (NRR) is critical.

NRR measures the percentage of revenue you retain from existing customers, including expansion revenue from upsells and cross-sells. An NRR above 100% means you’re growing revenue from your existing customer base even before acquiring new customers. Strong NRR — particularly above 110% for larger companies — demonstrates powerful product-market fit and expansion potential.

Low churn rates demonstrate strong product-market fit and reduce buyer concerns about revenue sustainability post-acquisition. According to OPEXEngine, a 1% difference in churn can have a 12% impact on company valuation over five years.

Gross Margins

Your gross margin shows how efficiently you deliver your product. It’s calculated by subtracting the direct costs of delivering your service (hosting, support, etc.) from your revenue, then dividing the result by your total revenue.

SaaS businesses should typically maintain gross margins above 75%, with best-in-class companies exceeding 85%. According to Software Equity Group, as of Q4 2023, businesses with gross margins in the 70-80% range had a median valuation multiple of 5.9x, while those with gross margins above 80% achieved a median multiple of 6.9x.

Lower margins signal inefficient operations or a business model that won’t scale profitably, which directly impacts your multiple.

Customer Acquisition Economics

Buyers scrutinize your LTV:CAC ratio because it tells them whether pumping more money into your customer acquisition will generate profits or losses.

The benchmark to target is an LTV:CAC ratio of at least 3:1, with best-in-class companies reaching 4:1 or higher. According to Phoenix Strategy Group, a ratio between 3:1 and 4:1 is often seen as the ideal balance for achieving growth while staying profitable.

If your Customer Acquisition Cost (CAC) is too high relative to what customers actually pay you over their lifetime (LTV), it means growth will burn cash rather than create value. This will result in lower multiples or deal structures heavily weighted toward earnouts.

Customer Concentration Risk

If your largest customer represents 15–20% of your ARR, buyers will see significant risk. The loss of that single customer could devastate your business, which buyers factor into valuations through lower multiples or earnout structures.

Solganick shared with us a good rule of thumb: “No single customer should represent more than 10% of your revenue.” High customer concentration can scare off private equity buyers entirely or result in substantially lower valuations.

Market Position and Timing

Things you cannot necessarily change also play a key role in your valuation. Currently, companies in high-growth areas like AI, data analytics, advanced applications, edge computing, and cybersecurity are much more likely to receive higher multiples. These sectors are seeing exceptional buyer demand because, according to Solganick, “AI-enabled companies remain in high demand from buyers. There’s so much money going into AI between new investments and add-on acquisitions. Buyers are acquiring all shapes and sizes of companies to get into AI right now.”

The cybersecurity sector is similarly hot due to increasing security breaches and risk concerns. Companies in these high-demand verticals often command premium multiples simply because multiple strategic buyers need these capabilities and are competing aggressively to acquire them.

Market timing matters, too. The SaaS market has recovered from its 2022-2023 lows but hasn’t returned to 2021 peaks. Solganick notes that conditions are “stronger this year than last year. More people are buying. Valuations are up.” With over three trillion dollars in private equity capital available — though not all allocated to software — there’s significant dry powder for acquisitions. Understanding current market conditions helps you decide if now is the right time to sell.

How M&A Advisors Calculate Your Multiple

M&A advisors use your KPIs and financial data within the context of bigger market conditions to arrive at an accurate multiple. They’ll analyze:

• Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR)
• Customer churn rate (both customer count and revenue churn)
• Customer acquisition costs and lifetime value
• Predictable revenue growth patterns
• Gross margins and operating efficiency
• LTV:CAC ratio and unit economics

Here’s why you want to work with an M&A advisor with recent and relevant experience in selling SaaS companies:

• They use data from comparable companies: Advisors in our network have closed SaaS deals and can inform their valuations with actual transaction data, not just theoretical multiples.
• They understand what buyers actually pay: In a recent software deal, Solganick’s firm contacted approximately 300 potential buyers, received 80 signed NDAs, got 16 initial offers, moved 8 to the next round, and ultimately received 6 letters of intent. This funnel demonstrates why advisor networks matter — most business owners simply don’t have access to 300 qualified buyers. Before working with an advisor, this owner had only one offer.

At the end of the day, your SaaS company is worth what someone is willing to pay for it. An experienced advisor with access to recent market data can give you an accurate picture of that number.

How to Maximize Your SaaS Company’s Multiple

We recommend you get your business valued early and often. This will let you see where your company stands and whether there’s a gap between your current value and your exit goals.

If your multiple is lower than you need, you have time to increase it. But first, you need an accurate baseline. As Solganick told us, “Most companies with $5 million to $50 million in revenue haven’t cleaned up their financials and gotten their metrics in order unless they’re already private equity backed.”

Start by cleaning up your financial systems and getting a sell-side quality of earnings (QoE) report from an accounting firm. This gives you two things: an accurate picture of your current metrics, and credibility with sophisticated buyers when you eventually go to market. With clean financials, you can see exactly which metrics need improvement — and track your progress as you make changes.

Once you have that baseline, focus on these six areas that drive SaaS valuations:

1. Reduce Customer Churn to Increase Lifetime Value

Target benchmark: For B2B SaaS, aim for monthly churn rates below 2% or annual churn below 10%. These levels demonstrate strong product-market fit and predictable revenue to buyers.

How to get there: Focus on personalized onboarding flows based on user roles, implement early warning systems with automated alerts when customers show signs of disengagement, and establish quarterly business reviews for higher-value accounts to identify expansion opportunities before concerns lead to churn.

2. Optimize Your LTV:CAC Ratio for Efficient Growth

Target benchmark: Achieve an LTV:CAC ratio of at least 3:1, with best-in-class companies reaching 4:1 or higher.

How to get there: Focus on your most profitable acquisition channels. Many companies discover that organic channels (SEO, referrals) produce customers with 25-40% higher lifetime values. Implement tiered pricing to increase LTV by allowing customers to upgrade as they grow, and reduce acquisition costs through marketing automation and lead scoring to focus sales efforts on the highest-quality prospects.

3. Improve Gross Margins

Target benchmark: Maintain gross margins above 75%, with best-in-class companies exceeding 85%.

How to get there: Audit your technology stack to identify redundant software licenses or opportunities to negotiate better rates with cloud providers. Automate customer support with chatbots, self-service knowledge bases, and in-app guidance. Optimize your pricing model by moving customers from monthly to annual plans where possible, and review your cost of goods sold to ensure you’re properly categorizing expenses.

4. Reduce Customer Concentration Risk

Target benchmark: No single customer should represent more than 10% of your revenue, and your top 5 customers should account for no more than 25% of total revenue.

Solganick is direct about this risk. “If you have one client that’s doing 80% of your revenue, then you’re not ready to sell. That’s too much risk.” While that’s an extreme example, even having a single customer represent 15-20% of your ARR raises significant concerns for buyers. They’ll factor this risk into valuations through lower multiples or earnout structures, where a portion of your sale price depends on retaining that key customer.

How to get there: Calculate your concentration ratio monthly and address issues proactively. Diversify across industries and company sizes instead of focusing solely on enterprise accounts. Set internal limits preventing any single deal from exceeding 8-10% of annual revenue, and create automated success programs for smaller accounts so you’re not neglecting them while focusing on large customers.

5. Implement Buyer-Ready Financial Controls and Reporting

Target benchmark: Have clean, auditable financials with accurate SaaS metrics reporting that can withstand due diligence from sophisticated buyers.

Solganick put it this way: “If your company is still using simple accounting systems like QuickBooks, I’d generally recommend that you implement a more robust system that can correctly report KPIs and operating metrics. That data is key in helping a buyer see your value.”

How to get there: Upgrade to specialized SaaS accounting platforms like NetSuite or Sage Intacct to properly track recurring revenue, deferred revenue, and other SaaS-specific metrics. Implement monthly financial closes within 5-10 business days each month; create automated KPI dashboards for real-time reporting on key metrics like MRR, ARR, churn rates, CAC, and LTV; and prepare a virtual data room proactively with 3 years of financial statements, customer contracts, employee agreements, and IP documentation.

6. Demonstrate Predictable Revenue Growth

Target benchmark: Show consistent month-over-month MRR growth with predictable seasonality patterns. The median growth rate is 25%, but predictability and consistency matter as much as the number itself.

How to get there: Build recurring revenue streams through annual contracts, multi-year deals, and usage-based pricing that grows with customer success. Track leading indicators like new trial signups, trial-to-paid conversion rates, and pipeline velocity to predict future MRR growth 2-3 months in advance. Create seasonal forecasting models so buyers can see the predictability in your cycles, and implement customer success metrics by tracking NRR monthly.

Multiple Improvements Create Compound Effects

These six improvements work together to create compound effects on valuation. As a hypothetical example, consider a form-building SaaS tool that reduced churn from 5% to 2% monthly, improved its LTV:CAC ratio from 2.8:1 to 4.2:1, and diversified its customer base to eliminate concentration risk. Changes as impactful as those could increase their valuation multiple from 4.2x ARR to 6.1x ARR — a 45% increase in enterprise value.

The key is to start measuring these metrics now, establish improvement targets, and systematically work on the areas that will have the biggest impact on your specific business. Remember, buyers evaluate these metrics as a package — strong performance across multiple areas signals a well-managed, scalable business that commands premium valuations.

How Axial Helps You Find the Right SaaS M&A Advisor

In this post, we focused on explaining SaaS multiples, valuation ranges, and how to value a SaaS company.

But getting your ideal exit requires more than just a good valuation. Your M&A advisor will also take your business to market, manage the M&A process, and help close the deal.

The challenge for most companies is choosing which SaaS M&A advisor to work with. Business owners don’t have experience in M&A, making it difficult to choose an M&A advisor.

That’s where we come in at Axial. We’ve developed a data-driven approach to match SaaS business owners with M&A advisors who have relevant experience and proven track records in the software industry. We have a network of over 3,000 M&A advisors and investment banks, with data on thousands of deals that have been marketed through our network.

When we evaluate advisors for SaaS companies, we look for professionals who:

• Have sold SaaS businesses similar to yours in terms of size, business model, and market
• Understand software industry valuations and can properly assess technology scalability, technical debt, and competitive moats
• Have relationships with buyers who actively acquire software companies
• Can speak credibly about SaaS metrics like ARR, MRR, churn, CAC, LTV, and NRR

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 have successfully navigated the unique challenges of selling subscription-based software companies — from positioning recurring revenue models to sophisticated buyers, to managing due diligence around technical infrastructure and intellectual property.

The difference between a good exit and a great exit often comes down to having an experienced guide who understands both the SaaS market dynamics and your specific goals. As the data consistently shows, businesses represented by experienced M&A advisors not only sell for higher prices but are significantly more likely to complete a successful transaction.

Schedule your free exit consultation to learn what your SaaS business is worth and explore your exit options. We’ll connect you with advisors who have the right experience to help you achieve your ideal exit.