Multiple on ~$700k EBITDA SaaS company?

investor profile

June 26, 2020

by an investor from Carnegie Mellon University - Tepper School of Business in Philadelphia, PA, USA

In people's experience, what multiples are small SaaS companies being acquired at? I'm looking at a $500-$700k EBITDA (depending on how you weight FY###-###-#### US-based company, am planning on making an offer, but this will be my first offer in the SaaS industry. Thanks for your help!

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commentor profile
Reply by a searcher
from New Bulgarian University in Walnut Creek, CA, USA
How is the revenue structured? For example, if a large chunk of the revenue is tied to a handful of companies, you may want to look at these. How long do the subscribers stay with the service? If they stay with the service for years (and on a paid plan) that's a good thing. If they switch it on and off all the time, that's not a good thing. And then there's the question - what are you going to bring to the table? Let's say for a SaaS company you offer 5 to 10 multiple (as any less then that makes no sense at all). Do you really want to spend 5 to 10 years just to break even? Probably not. Which is why you must have an angle how to improve that business, be it through reducing costs of running the business, improving acquisition funnels or improving retention funnels. If you have a solid insight, go for as low as the seller would go (obviously :) ). Otherwise, SaaS takes really long time to pay off.
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Reply by a searcher
from University of Pennsylvania in Wrentham, MA, USA
A true SaaS co trades on a revenue multiple right now. If you can buy it for 5x to 10x EBITDA, do it. You said this was your first time bidding on SaaS? It's not like other sectors. 8x is probably the floor.

(edited to clarify I was quoting an ebitda multiple)
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