SaaS valuation is more contested than any other category in online business M&A. Public SaaS multiples swing wildly with the interest rate cycle. Growth-stage benchmarks bear little resemblance to the sub-$1M ARR band. And most published "SaaS multiple" numbers are institutional benchmarks that don't apply to bootstrapped businesses at all.
What follows is the framework that actually applies to SaaS businesses in the bootstrapped-to-lower-mid-market range. The calculator above runs your numbers against it. For company-level diligence framing, see SaaS company valuation; for earlier ARR bands, see early-stage SaaS valuation.
How SaaS valuations actually work
SaaS is typically valued on an ARR multiple (annual recurring revenue), not SDE, because recurring revenue is the value driver — the business is worth what its book of contracts generates. For bootstrapped SaaS, buyers sometimes cross-check the ARR multiple against an SDE multiple to ensure the business is actually profitable, not just growing on paper.
The multiple you can realistically expect depends on ARR size, growth rate, net revenue retention (NRR), and gross churn.
Multiples by ARR band
The market for private SaaS businesses splits into bands that trade at meaningfully different multiples.
Below $100k ARR: 2.0x–4.0x ARR. Range is wide because these businesses are usually founder-dependent and buyer pool is thinner.
$100k–$500k ARR: 3.0x–5.5x. This is the "acquired by strategic operators" band — private buyers, holding companies, individual acquirers.
$500k–$2M ARR: 4.5x–8.0x. Institutional buyers enter, competition increases, multiples expand.
$2M–$10M ARR: 6.0x–12.0x. Lower mid-market PE begins to compete.
Above $10M ARR: 8.0x–20.0x+ depending on growth rate, category, and market cycle.
The numbers above are for profitable or breakeven businesses. Loss-making but fast-growing SaaS trades on a different framework (revenue multiples adjusted for growth rate) and is really a venture-style transaction, not an acquisition in the sense used here.
What drives you toward the top of the range
The gap between the bottom and top of any ARR band comes down to five factors.
Net revenue retention. NRR above 100% (existing customers expand faster than they churn) is worth roughly a full turn of multiple compared to NRR under 90%. Businesses with strong NRR are effectively growing without new customer acquisition.
Gross churn. Sub-2% monthly gross churn is typical of businesses trading at the top of a band. 5%+ monthly and you're often out of the "acquired by strategics" market entirely — the business is too leaky.
Growth rate. Growth matters most in the $1M+ ARR range. Below that, profitability and stickiness matter more than raw growth.
Customer concentration. Any single customer over 10% of ARR is a concentration flag. Above 25% and the business often trades at closer to a services multiple.
Acquisition channel diversification. Products that get customers through 3+ distinct channels (organic search, paid ads, partnerships, referrals, product-led growth) trade at higher multiples than single-channel businesses.
What the multiple doesn't tell you
Purchase price is ARR multiple times ARR, but what you actually receive at close depends on deal structure. Cash at close, seller notes, earnouts, escrow holdbacks, and reps and warranties insurance premiums all move the effective price.
A "5x ARR" deal with 40% held back over 24 months is not the same as a "5x ARR" cash-at-close deal. If you're comparing offers, always look at the cash-at-close figure and the earnout terms — not just the headline number.
Frequently asked questions
What multiple should I expect for a $250k ARR SaaS growing 20% year-over-year with 3% monthly churn?
Realistically, 3.5x–4.5x ARR ($875k–$1.125M) in the current market. Top of range would require better churn (sub-2%) or higher growth.
Do buyers value MRR or ARR?
Both, but ARR is the headline number. MRR is used to check that the ARR is real (annualised MRR should equal ARR, or the difference is diagnosable).
How does gross margin factor in?
Gross margin below 70% starts to affect the multiple materially. Most healthy SaaS runs 75–85% gross margin. Below 70% suggests either high infrastructure costs or misclassified expenses, and either way it flags in diligence.
What if I have some non-recurring revenue?
Buyers value recurring and non-recurring revenue separately. Setup fees, one-time services, and consulting revenue typically get valued at 1x–2x annual rather than the SaaS multiple. Make sure your P&L breaks these out cleanly — buyers who have to guess will guess against you.
Do I need to be profitable to sell my SaaS?
For sub-$1M ARR businesses, effectively yes. For $1M+ ARR businesses with strong growth, no — but the deal structure and buyer pool shifts significantly for loss-making businesses.
If you're thinking of selling, Astora Group buys SaaS businesses in the sub-$500k ARR range. The form below is the fastest way to get an honest first response.