How to Value a SaaS Business
Three things decide the price: revenue multiple, growth trajectory, and net churn. Everything else — retention, concentration, tech risk — moves the multiple inside a band the market already sets.
1. Start with the revenue multiple
Most indie SaaS under $500k ARR sells for 2.5× to 4× annual revenue. That's your anchor. Take current MRR × 12, then apply the band. A $4k/mo SaaS = $48k ARR = $120k–$192k fair range before adjustments.
2. Adjust for growth
Every 5 percentage points of monthly growth adds roughly 0.5× to the fair multiple, capped around 5×–6× for indie-scale. Flat MRR pulls to the low end of the band. Declining MRR pushes below it and starts to look like a profit multiple deal.
3. Adjust for churn
Churn is the killer. Every 1 percent of monthly churn above 3 percent knocks about 0.3× off the multiple. Net negative churn (expansion > churn) puts the deal at the top of the band or above.
4. Convert to ROI and payback
The two numbers acquirers actually decide on: ROI (annual profit ÷ asking price) and payback (asking price ÷ monthly profit). For SaaS, 30 percent+ ROI and sub-36-month payback is the working bar. Below that, the deal has to have a strategic angle to justify the price.
5. Sanity-check against comparables
Pull 5–10 recently closed indie SaaS in the same ARR band and category. Startup Index shows verified MRR and multiple on every card, so you can compare against live deals rather than survey averages that skew toward brokered exits.
Try it on your target
Plug the numbers into the calculator to see fair range, ROI, payback, and revenue multiple together.
Your numbers
Fair asking price range
Base range assumes 2.5x to 4x annual revenue for SaaS, with growth adding and churn above 3% subtracting.
Verified listings to benchmark against
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BambooVPN
AppBambooVPN is a fast, no-logs VPN app with global servers. Stream, game and browse securely with one tap. Trusted by over 500000 users worldwide.
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Frequently Asked Questions
What is the average SaaS valuation multiple?
Indie SaaS under $500k ARR: 2.5×–4× annual revenue. $500k–$5M ARR: 4×–8× ARR depending on growth. Above $5M with strong retention: 8×–15× ARR. The band widens with growth and narrows with churn.
How do I value a SaaS with no profit?
Revenue multiple, discounted for lack of profitability. Break-even SaaS with 20 percent MoM growth still trades 3×–5× ARR because acquirers price the growth curve. Declining SaaS with no profit is closer to 0.5×–1× ARR.
Do buyers use revenue multiple or profit multiple?
Under $500k ARR: revenue multiple, because indie SaaS margins are relatively uniform. Above $1M ARR: SDE or EBITDA multiple, because opex structures diverge. Brokers usually publish both.
How much does churn affect valuation?
A lot. Every 1 percent monthly churn above 3 percent typically knocks 0.3× off the fair multiple. A 5×-worthy SaaS with 6 percent churn realistically trades at 4×.
What discount rate should I use?
Most indie buyers don't formally DCF — they target a payback period (24–36 months) and ROI (30–50 percent/yr). Institutional buyers use 15–25 percent hurdle rates depending on deal risk.