How to Value a Technology Company: A Guide for Business Owners

Valuing your technology company is a good way to see if your business is exit-ready. By knowing your company’s value, you can assess if you’re likely to get the exit you want — not just in terms of final sale price, but also in the type of deal structure you get, such as how much of your sale price is tied up in earnouts.

The problem is that owners often have an inaccurate understanding of how a buyer will value their company. Owners often gauge their company’s value by looking at public company multiples, industry averages, or their own internal metrics. But without understanding current market conditions, active buyer demand, and what buyers are actually paying in recent transactions, these approaches miss the mark. In our experience, owners can be off when it comes to understanding their company’s value.

We recently spoke with Aaron Solganick, CEO of Solganick & Co., a data-driven investment bank focused exclusively on software and IT service companies. He put company valuation this way:

“If a company gives me their ARR, gross margin, and EBITDA, I can give them a rough estimate of their value. But before you go to market, you want a specific and accurate multiple. Getting at your accurate multiple requires your KPIs and financial data, as well as understanding what buyers in the market are actually paying for companies like yours right now.”

When M&A advisors like Solganick do such an in-depth analysis, they’re getting at not just what your business is worth, but what a buyer would be willing to offer for it.

This is why we recommend that you get your company valued early and often.

With an accurate, market-ready valuation, you can:

• Decide if now is the right time to sell: If your current valuation doesn’t meet your exit goals, you can focus on improvement areas before going to market rather than accepting a suboptimal outcome.

• Evaluate unsolicited offers: When competitors or other buyers approach you directly, having an accurate baseline helps you determine if their offer represents fair market value or if you should explore other options.

• Set realistic exit expectations: An accurate valuation prevents the disappointment and wasted time that comes from overvaluing your business and pursuing unrealistic exit goals.

• Identify gaps to address before going to market: Understanding which factors most impact your multiple allows you to prioritize improvement efforts where they’ll have the biggest impact on your exit outcome.

At Axial, we work with technology companies across multiple verticals that are interested in exploring a sale. Our network includes SaaS platforms serving enterprise clients such as government agencies and Fortune 500 companies; cybersecurity firms protecting against emerging threats; data analytics companies providing business intelligence solutions; IoT solutions connecting physical devices to cloud platforms; and enterprise software companies streamlining business operations. We help our clients find the right M&A advisor who can accurately value their business and take them to market.

The businesses we work with typically have revenues ranging from $5M to $100M+, each with distinct positioning challenges, such as finding an investment bank that understands complex technical due diligence processes or needing guidance on how enterprise sales cycles affect valuation multiples.

To learn more, schedule a free exit consultation.

How to Value a Technology Company

M&A advisors typically use multiple valuation methods to arrive at an accurate range for your technology company.

When we asked Aaron Solganick about his firm’s approach, he explained: “We generally focus on comparable companies and precedent transactions when arriving at your valuation multiple.” This approach makes sense for advisors with deep industry experience — they’ve closed deals in your sector and have access to proprietary transaction data that isn’t publicly available. This is why finding an M&A advisor with relevant deal experience matters: they bring real-world transaction data from companies similar to yours.

Solganick also discussed using discounted cash flow (DCF) analysis, which values companies based on projected future cash flows rather than market multiples. “DCF is sometimes used for mature, profitable technology companies, but revenue multiples provide a more practical framework for most businesses, especially those still in high-growth mode.”

The key here is that M&A advisors will use various valuation methods, based on your business model and growth stage, to arrive at an accurate valuation range for your company.

Below, we cover the three different valuation methods Solganick mentioned that are most often applicable when valuing technology companies, specifically software/SaaS companies.

Valuation Method #1: Comparable Company Analysis

Comparable company analysis benchmarks your company against publicly traded technology companies in your sector to understand what multiples similar businesses command in the market.

Advisors select comparable companies based on business model, geographic market, and growth characteristics rather than just size. For example, if you’re a cybersecurity SaaS company, your advisor will look at public cybersecurity software companies with similar growth profiles and customer retention patterns, even if those public companies are significantly larger.

However, direct comparisons can be challenging. Public companies are typically much larger, more liquid, and have more resources than private mid-sized businesses. Experienced advisors apply appropriate discounts for private company status, smaller size, and reduced liquidity compared to public markets. Then, they adjust for your specific characteristics — a company growing 50% annually might command a premium over the comparable set, while a company with higher customer concentration might receive a discount.

The value advisors bring is understanding which public comparables are most relevant to your business and how to adjust those multiples to reflect your specific growth rate, profitability, customer metrics, and market position.

Valuation Method #2: Precedent Transaction Analysis

This approach examines recent acquisitions of similar technology companies to understand what buyers actually paid in real M&A deals. Private transaction data is particularly valuable because it reflects actual exit outcomes rather than public market trading multiples.

Advisors focus on transactions completed within the last 18 months, as market conditions in technology change quickly and older deals may not reflect current valuations. They analyze not just the headline multiples buyers have paid, but also the deal structure — how much was cash at close versus earnouts or equity rollovers. This reveals typical deal terms for companies like yours, not just valuation levels.

The challenge is that no two companies are identical. Advisors factor in how your growth rate, profitability, customer base, and market position compare to the precedent transactions to determine where your valuation would likely fall.

The key advantage of precedent transactions is that this data shows what buyers actually paid, not just what public markets think companies are worth. However, much of this data isn’t publicly available. Experienced advisors provide value through their networks and access to proprietary deal databases from transactions they’ve completed or have knowledge of.

Valuation Method #3: Discounted Cash Flow (for More Mature Businesses)

DCF analysis is less common for early-stage, high-growth technology companies but becomes more relevant for mature businesses with predictable cash flows.

This method works best for companies with stable customer bases, predictable revenue patterns, and clear paths to profitability — such as mature IT services firms or established vertical software companies. However, high-growth companies reinvesting heavily in expansion often show minimal cash flows despite strong fundamentals, making revenue multiples more appropriate for valuation.

The challenge with DCF for technology companies is that rapid market changes, competitive dynamics, and technology evolution make long-term cash flow projections difficult and potentially misleading, especially for companies in emerging categories.

Here are more resources for valuing your company:

• Axial’s Free Business Valuation Calculator
• SaaS Valuations: How to Understand Your Business’s Worth
• How to Value a Company for Sale

How to Maximize Your Technology Company’s Value

We recommend getting your business valued early — ideally 6–12 months before you plan to go to market. This timeline gives you enough runway to address any gaps that could impact your valuation without delaying your exit unnecessarily.

If your current valuation doesn’t meet your exit goals, you have time to make improvements. The key is to establish an accurate baseline first, then systematically address the factors buyers care about most.

When we spoke with Solganick, he shared that the areas that most significantly impact technology company valuations include:

• Revenue model quality: Companies with higher recurring revenue percentages command premium multiples because buyers can more accurately predict future cash flows and reduce acquisition risk. If you have a hybrid model that combines subscriptions and services, increasing your recurring revenue component will improve your valuation.

• Customer retention: Low churn rates demonstrate strong product-market fit and make future revenue more predictable. Buyers view high churn as a risk signal that they’ll need to replace lost revenue constantly, which directly impacts their return on investment.

• Operational efficiency: Strong gross margins show you can deliver your product efficiently and scale profitably without proportional cost increases. Buyers evaluate whether they can grow your business without margins deteriorating — weak margins suggest the business model may not be sustainable at scale.

• Customer acquisition economics: A healthy ratio between customer lifetime value and acquisition costs signals that investing in growth will generate returns, not burn cash. Buyers need confidence that pouring capital into your sales and marketing engine will produce profitable growth.

• Growth and profitability balance: Buyers want to see that you can either grow quickly or generate strong margins — ideally both. The most valuable companies demonstrate they’re building sustainable businesses, not just burning capital to chase growth that may not translate into long-term value.

• Customer concentration: In our interview, Solganick recommended that “no single customer should represent more than 10% of your revenue.” High customer concentration creates significant risk. If that major customer churns post-acquisition, the buyer’s entire investment thesis collapses. This risk leads buyers to reduce valuations significantly or structure earnout-heavy deals where you only get paid if those customers stay.

• Financial systems: Buyers expect sophisticated reporting systems that can withstand due diligence scrutiny. As Solganick explained, “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.” Inadequate systems signal operational immaturity and make buyers question whether your reported metrics are accurate.

You can read more about improving performance in our articles on:

• How to Maximize Business Value Before You Sell
• 6 Key SaaS Metrics that Determine Your Valuation Range

An experienced M&A advisor can help you identify which metrics matter most for your specific business model and buyer pool, then create a timeline for addressing gaps before going to market.

How to Increase the Chances of Achieving Your Ideal Exit

As discussed, the right M&A advisor can get you an accurate, market-ready valuation by leveraging comparable transaction data from recent deals, understanding how different buyer types evaluate technology companies, and bringing sector-specific expertise that ensures your unique value propositions are properly reflected.

But understanding your technology company’s valuation is just the starting point. 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 technology transactions makes a measurable difference.

M&A advisors 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.

M&A Advisors Can Create Competitive Bidding Environments

Most owners receive one unsolicited offer with no context about whether it’s competitive. Advisors create competitive environments that drive better outcomes.

They do this by marketing your business in their network. Advisors build these diverse buyer pools by targeting strategic buyers (larger technology companies seeking geographic expansion or technology integration), private equity firms (looking for platform investments or add-on acquisitions), and independent sponsors partnered with institutional capital focused on growth-stage technology companies.

Solganick shared with us just one example from his client list to show us how large a buyer distribution channel is needed to secure multiple viable buyers.

The Solganick team:

• Marketed one of their clients to ~300 potential buyers within their network. This is a network of good-fit buyers who have acquired companies like the client’s before.
• Of those ~300 potential buyers, 80 signed NDAs. An NDA allows buyers to review confidential business information — financials, customer lists, operational details — that they need to evaluate the opportunity seriously. When a buyer signs an NDA, it signals they’ve moved beyond casual interest and are willing to invest time in a detailed evaluation.
• Out of those 80 buyers, 16 submitted Indications of Interest. An IOI is the buyer’s first written offer based on the information they’ve reviewed. It outlines their preliminary valuation range and deal structure, helping the seller understand which buyers have realistic price expectations and genuine acquisition intent.
• From that 16, Solganick and his team narrowed the list down to 8 viable candidates who were good strategic and cultural fits for an acquisition.

With eight qualified options, the owner has significantly better odds at securing favorable terms and achieving their ideal exit.

M&A Advisors Position Your Company Strategically

Technology businesses have unique characteristics that require specialized knowledge to market effectively. Unlike traditional businesses evaluated primarily on revenue and profit, technology companies are valued based on complex metrics like recurring revenue quality, customer retention, technical infrastructure, and growth efficiency.

An experienced advisor understands how to present these metrics in ways that help buyers see their value. The value of your metrics depends heavily on the type of buyer you’re targeting and what they’re looking for in an acquisition.

Different buyers value different aspects of your business:

• For example, strategic buyers (larger technology companies or technology firms) may focus on customer base overlap, geographic expansion opportunities, and technology integration potential. Advisors emphasize metrics that demonstrate market penetration and how your platform complements their existing offerings.

• Meanwhile, private equity firms prioritize cash flow predictability and growth efficiency. For these buyers, advisors highlight strong customer economics, low churn rates, consistent revenue growth patterns, and operational improvement opportunities they can implement.

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.

You can learn more in our articles on:

• Strategic Buyers vs. Financial Buyers: Finding the Right Buyer for Your Exit
• How to Find a Buyer for Your Business in 5 Steps

M&A Advisors Are Experienced Negotiators

Technology transactions often involve complex structures that significantly impact your actual payout: cash at close, rollover equity for potential “second bite” returns, earnouts tied to performance metrics, and employment or consulting agreements.

Your M&A advisor has experience evaluating dozens of deal structures and brings objectivity that allows them to assess terms 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 assess whether proposed metrics are achievable and negotiate measurement methodologies that include partial credit for near-misses rather than all-or-nothing structures.

• Maintaining leverage with multiple buyers: By keeping multiple qualified buyers engaged through due diligence, advisors prevent any single buyer from gaining too much negotiating leverage throughout the process.

Beyond price, advisors help optimize your total exit experience. This includes finding buyers whose approach aligns with your vision for the company’s future, identifying buyers who can meet your timeline, and structuring post-sale involvement that matches your preferences.

Finding the Right M&A Advisor for Your Technology Company

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 technology businesses, this means identifying advisors who understand technology industry valuations, know the nuances of technology due diligence, and have relationships with buyers who actively acquire technology 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 technology transactions at competitive valuations.

Our evaluation process considers three critical factors:

• Relevant deal experience: We prioritize advisors who have successfully sold technology 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.

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

Each advisor on your shortlist will have demonstrated expertise in technology 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.

Schedule your free Exit Consultation today.