Valuations in software services or SaaS businesses

searcher profile

January 08, 2020

by a searcher from University of California, Berkeley in El Dorado Hills, CA, USA

Hope everyone had a great###-###-#### What valuation expectations searchers saw sellers have and particularly curious if anyone closed a software deal and wanted to know at what valuation?

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commentor profile
Reply by an investor
from University of Pennsylvania in New York, NY, USA
I purchased a SaaS business last year and would be happy to discuss the details directly. Agree with the comment above - the range is exceptionally wide. I've seen $2M EBITDA businesses expecting 4x and others expecting 10x EBITDA. A lot of businesses are marketed as SaaS but when you look under the hood they have lots of consulting or custom programming which is much lower multiple.
commentor profile
Reply by a searcher
from Temple University in Philadelphia, PA, USA
Hi Atul - The answer depends on size of the business, rate, # of customers, customer churn and revenue churn, etc. In general, if the business has less than $2m EBITDA you could look for 4x-6x EBITDA. ARR valuations typically happen when a company has more than $5m top line that has rapid growth. Happy to talk in greater detail if you have a specific company or question.
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