Why wait for the future exit events to plan the future of your SaaS business?
Use our calculator to get an estimate and decide on the next business strategy for exit planning, fundraising, and acquisition.
What This SaaS Valuation Calculator Is Designed For
Your SaaS valuation results should be a starting point to:
- Support Strategic Decisions: You can use the estimate to maximize your company’s value and identify opportunities to improve the value drivers in your SaaS valuation.
- Raising Capital: With the valuation figure, you can prepare for fundraising discussions so you don’t undervalue your company or discourage potential investors.
- Negotiate an Acquisition Offer: A valuation estimate serves as a benchmark for your business performance, providing context for preparing for negotiations. You can use it to anticipate a more lucrative exit further down the track.
However, there are scenarios where you would need more than a calculator and instead consider professional valuation.
How the SaaS Valuation Calculator Works
Whether you’re a startup, a scaleup, or an established SaaS business, here are the steps to use our calculator:
Step 1: Enter Your Revenue Metrics
Start by providing your revenue figures that form the foundation of your valuation estimate:
- Enter the Annual Recurring Revenue (ARR)
- Pick your Year-over-Year Growth Rate and Gross Margin
- Choose the Canadian or US dollar as the currency.
Step 2: Add Retention and Efficiency Metrics
Next, enter the metrics that show how your SaaS business retains customers and generates growth. They assess the long-term stability of revenue and operational performance.
- Net Revenue Retention (NRR)
- Monthly Operating Loss (Burn)
- Approximate Customer Count
- Monthly Gross Churn
Step 3: Complete Your Business Profile
Provide information about your overall company’s structure. The factors provide context to assess your business value.
You should fill in:
- Funding stage, whether bootstrapped, Seed, Series A, or Series B+.
- Business model, whether B2B, B2C, vertical, or marketplace/PLG SaaS.
- Top customer revenue concentration.
- Years in operation.
Step 4: View Your Valuation Results
Once you submit your information, our calculator will generate your SaaS valuation range.
Please fill in your information so we can share the results. The details such as your name, business email address, phone number, company name, and your primary valuation goal.
Note: Your information will only be used to send your valuation results and relevant resources from JS CPA Strategic Solutions.
Calculate Your SaaS Business ValuationWhat Your SaaS Valuation Results Mean
Your SaaS valuation results reveal the estimated worth of your business, calculated by the financial and operational metrics you provided.
- Higher Valuation Range: Indicates your SaaS business has strong recurring revenue, healthy customer retention, efficient growth, and favorable business fundamentals.
- Lower Valuation Range: On the other hand, a lower estimate may show that there’s slower growth, higher churn, or inconsistent revenue performance.
However, you should not view the results as your final business valuation. Instead, partner with a firm with experience in real-world valuations.
At JS CPA Strategic Solutions, we can conduct your valuation based on a range of factors, including your market positioning, churn, business age, and owner dependency. We can also help you identify opportunities to maximize your company’s value.
How to Value a SaaS Company
Depending on your SaaS business’s profitability and maturity, you can pick any of these 3 methods to determine the fair market value of your company:
Revenue-Based Valuation Approach
Revenue-based or Annual Recurring Revenue (ARR) valuation focuses on the potential growth of your SaaS company.
It’s ideal if you’re a growing SaaS business with no current numbers to support a profitability forecast.
EBITDA-Based Valuation Approach
The earnings before interest, taxes, depreciation, and amortization (EBITDA) determine your SaaS company’s economic value based on its financial stability.
It looks at a business’s true earnings power while reflecting the owner’s compensation or discretionary expenses.
This valuation model is great if you’re a large SaaS enterprise with high earnings, a more complex management structure, more employees, and operating in a fast-growing market.
SDE-Based Valuation Approach
The Seller Discretionary Earnings (SDE) valuation method is best suited to owner-operated SaaS businesses or companies with ARR below $5 million.
With this approach, you can display your company’s earnings after paying all business expenses. For SaaS businesses, they fall within the 4x-10x annual SDE range.
Unsure how to calculate your company’s value?
Try Our SaaS Valuation CalculatorKey Factors That Influence Your SaaS Valuation
The valuation of your SaaS company is influenced by several strategic factors that enhance the value, such as:
| Valuation Driver | How It Moves Your Multiple |
| Company’s Intellectual Property (IP) | Your proprietary technology and data assets give you a unique competitive advantage. |
| Management and Organizational Assessment | Investors value companies with a strong management team with SaaS industry experience, which helps navigate market challenges and foster growth. |
| Financial Performance Analysis | Your SaaS company must maintain detailed financial records, such as P&L statements, that demonstrate predictable revenue for investor assessments, which, in turn, affect valuation multiples. |
| Customer Metrics | MRR, LTV, CAC, and churn affect the perceived future cash flows of your SaaS business. Higher LTV, MRR, and CAC metrics indicate that recurring revenues are growing, improving the valuation. |
| Customer Concentration | When you have a diverse client base, you reduce your dependency on a small number of clients, which improves your SDE multiple for valuation and demonstrates to investors that your business can be monetized. |
If you want to improve these SaaS value drivers before going to the market, consider our fractional CFO services.
When a SaaS Valuation Calculator Isn’t Enough
While getting a valuation estimate is the first step, there are scenarios in which you need a specialized M&A valuation expert:
- Active M&A Deals: You need more than an estimate in an M&A deal. You can leverage our CPA experience, valuation expertise, and strategic foresight, along with our tax and compliance services, to build the confidence to make better decisions.
- Regulatory Compliance: You need a professional valuation to comply with IRS, CRA, and other regulatory standards, helping you move forward with clarity.
- Shareholders’ Disputes: A professional valuation report can be presented in court to help resolve disputes among owners of privately held entities. The business’s actual worth can help to determine shareholder value for rightful distribution.
- Estate Planning: A valuation report from an expert can help with complex estate planning, business succession, and tax planning.
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Frequently Asked Questions (FAQs)
Let’s explore common questions about the SaaS valuation calculator and what to expect:
How Accurate Is a Free SaaS Valuation Calculator?
A free SaaS valuation calculator provides realistic estimates using your specific industry dynamics.
However, you should consider professional valuation services to determine your company’s actual worth for M&As and capital raising.
Can This Calculator Be Used for Fundraising or Exit Planning?
Yes, you can use the results from our free SaaS valuation calculator as an estimate to inform exit planning and fundraising.
However, you need a professional to determine your business’s actual value. In addition, an expert will provide fractional CFO services to guide your decisions, whether you’re seeking funding or planning an exit.
How Long Does a Full SaaS Valuation Take?
Generally, a full SaaS valuation takes 1 to 4 weeks, depending on the complexity of your business and the details you’ve provided.
Can the Calculator Handle Cross-Border SaaS Companies?
Yes, our calculator is designed for US and Canadian SaaS businesses.
You may further need valuation reports from a top business valuation company with cross-border M&A experience.
They can help you navigate the complexities of regulatory standards, offer M&A structuring to optimize deals, and minimize tax liabilities.
What Happens After I Get My Estimate?
Use your SaaS valuation estimate to help you prepare for raising capital and identify areas to improve before exit planning.
Consider M&A advisory services to evaluate how your company’s value will impact your overall tax liability and long-term financial efficiency.
Do I Need an Audit Before a CPA Valuation?
No, you don’t need an audit before a CPA valuation. However, you will generally be required to provide us with 3 to 5 years of financial documents, such as:
- Tax returns
- Income statements
- Balance sheet
- Cash flow statements
- Year-to-year financials
- List of intellectual capital
- Business forecasts and projections
If you don’t have these documents, you may need to partner with our team to organize your financial records and ensure your business is ready for valuation.
Get Clarity on Your SaaS Company’s Value
Every SaaS business valuation has unique circumstances, so it’s important to consult with experts in the SaaS M&A landscape.
At JS CPA Strategic Solutions, we guide Canadian and US founders with businesses generating $1M to $10M in annual revenue to clarify their market value and prepare for an M&A exit.
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