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SaaS Valuation Multiples: 2024 Report

Business
Saas Valuation Multiples

Last Updated: January 9, 2024

Our analysts recently conducted a meta-analysis on SaaS valuation multiples, aggregating publicly available data on SaaS dealflow from Q4 2022 – Q1 2024. The table below shows the average valuation multiples private SaaS companies are selling for today, broken down by the 3 most common valuation models: EBITDA, Revenue, and SDE. The data is further segmented by SaaS business type and EBITDA/Revenue/SDE range.

(Sources)

2024 SaaS EBITDA Multiples – Private Sector

Business TypeEBITDA Range
$1-3M$3-5M$5-10M
Advertising / AdTech10.2x10.5x12.2x
Agriculture / AgTech9.7x11.4x12.1x
Communication12.4x13.2x14x
Customer Relationship Management (CRM)12.4x13.4x15.1x
Cybersecurity12.8x14.3x15.7x
E-Commerce13.3x14.7x15.3x
Education / EdTech11.2x12.1x14.8x
Enterprise Resource Planning (ERP)12.5x14.2x14.9x
Enterprise13.8x14.5x15.2x
Environmental / CleanTech12.3x14.3x16.2x
Financial / Fintech12.314.5x15.4x
Healthcare / MedTech11.7x13.4x15.1x
Human Resources (HR)15.8x17.1x19.2x
Legal / Legal Tech10.8x11.8x12.6x
Real Estate / Proptech9.3x10.5x11.7x

2024 SaaS Revenue Multiples – Private Sector

Business TypeRevenue Range
$1-5M$6-10M$10-75M
Advertising / AdTech4.8x5.5x7.1x
Agriculture / AgTech5.3x6.1x8.6x
Communication5.8x6.6x7.1x
Customer Relationship Management (CRM)5.7x6.8x8.1x
Cybersecurity6.2x6.8x8.1x
E-Commerce6.3x7.7x9.3x
Education / EdTech5.3x6.1x6.8x
Enterprise5.8x7.3x9.7x
Enterprise Resource Planning (ERP)6.6x8x9.8x
Environmental / CleanTech6.2x7.4x8.0x
Financial / FinTech5.1x5.7x7.7x
Healthcare / MedTech6.1x7x9.2x
Human Resources (HR)5.9x6.9x9.2x
Legal / LegalTech4.8x6x7.4x
Real Estate / PropTech5.4x6.8x8.1x

2024 SaaS SDE Multiples – Private Sector

Business TypeSDE Range
$500k-1M$1M-2M$2M-3M
Advertising / AdTech6.4x7.5x8.2x
Agriculture / AgTech7.1x8.3x9.8x
Communication7.5x8.3x8.9x
Customer Relationship Management (CRM)7.5x8.3x9.1x
Cybersecurity7.8x8.5x9.5x
Education / EdTech6.2x7.0x8.3x
Environmental / CleanTech6.9x8.3x9.1x
E-Commerce7.1x8.6x9.5x
Enterprise7.8x9.0x10.5x
Enterprise Resource Planning (ERP)6.1x7.1x8.1x
Financial / Fintech7.8x8.5x9.2x
Healthcare / MedTech7.7x8.9x9.7x
Human Resources (HR)7.9x8.5x9.7x
Legal / LegalTech7.1x8x8.7x
Real Estate / PropTech6.6x7.8x9.1x

The following sections provide further context to the data above by offering a high-level overview of the current M&A environment for private SaaS companies, as well as suggestions for how to sell a SaaS company in 2024.

The 2024 M&A Market for SaaS Companies

Globally, the SaaS industry is valued between $197-232 billion in 2024, most of which are enterprises. With a CAGR of 25.25%, the industry is expected to more than triple by 2028, coming to a total of $720.4 billion. These numbers are on track with the industry’s historical expansion, having increased 7x over the last 10 years as more companies are seeking cloud-based services for their company.

Despite its projected growth, the economic downturn that began in Q3 2022 has negatively affected current valuation multiples. As of Q4 2023, industry reports cited SaaS revenue multiples at a three-year low, averaging a pre-pandemic level of ~5.5x. By comparison, Q3 2021 valuations hit a record high of 9.8x. Such a dramatic decrease was both a comment on the economic impact of global events (e.g., inflation, Russian / Israel wars) as well as the volatile nature of SaaS and the tech sector as a whole. However, 2024 has started strong and multiples seem to be on their way back up.

Average EBITDA Multiples for SaaS Companies [Private], H1 2019 – H1 2024

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As the economy recovers, SaaS company owners seeking to sell their company are contending with several challenges:

  • Increased business-lending interest rates as a result of the bear market (from approximately 4.5% last year to nearly 10%)
  • Massive sunk investments in company operations, leading to a difficulty in properly valuating the company’s worth

These factors contribute to the somewhat sparser M&A market of 2024. While deal volume and overall valuations are likely to pick up substantially in H2 2024 (assuming the Fed follows through on it’s projection to cut interest rates in mid-year), PE firms and strategics have reported that business owners are increasingly negotiating the sale of their business through M&A advisors who are experienced with SaaS and technology.

Related: See our list of the Top M&A Advisory Firms in the US

Common SaaS Valuation Models

Valuations for SaaS companies can vary quite a bit because most are unprofitable in the early stages of growth as they invest in scaling. As a result, models that look at company earnings (ARR, YoY Growth Rate, Gross Margin) are preferable for sellers as opposed to those that look solely at EBITDA. In general, larger companies, i.e. those with >$25 million revenue, will want to emphasize EBITDA in an M&A process whereas smaller companies will want to suggest alternative valuation models that focus on projected growth.

Below is a comparison of the 3 most common valuation models for SaaS companies.

Common SaaS Valuation Models

ModelEquationBest For
EBITDANet Income + Interest + Taxes + Depreciation + AmortizationEstablished companies with $5M in annual recurring revenue or more
Seller’s Discretionary Earnings (SDE)Total Revenue–Operating Expenses/Cost of Goods Sold) Owner CompensationSmaller SaaS Companies making less than $5M in annual recurring revenue.SaaS companies with a single owner
RevenueSum of subscription revenue for the year + Recurring revenue from add-ons and upgradesPrivate SaaS companies who have already been offered a valuation by a prospective buyer

Non-Financial Factors Affecting SaaS Valuations

When going to market with a business, SaaS owners and investors should also be aware of the following non-financial factors that have a substantial affect on valuation.

Non-Financial Factors Affecting SaaS Valuations

Factor Significance to SaaSFormulaSaaS Benchmark
Growth RateSaaS businesses that are able to handle the stresses of scaling are more likely to earn a higher valuation from the buyer.Previous Year Value – Current ValuePrevious Year  Value 1007-8%
Future ProofingSaaS is a fast-moving industry in which products often have a short shelf-life before they are replaced.See our article on selling/valuing a SaaS company.11-15/25
Cost to ReplicateThe value of SaaS companies is in the proprietary nature of their software. If this software is easy to replicate, buyers have less reason to purchase their company.# lines of codeX# months required to generate original codeSmall: 25,000+Medium: 50,000+Large: 100,000+

Further Questions

I believe in bringing transparency to M&A, which is why we publish valuation multiples. If you have any questions, I’m happy to offer advice from the perspective of someone who has sold multiple companies to a variety of buyers. You can reach me using the address below or by using the contact page on this website.

Evan Bailyn

Evan Bailyn is a best-selling author and award-winning speaker on the subjects of SEO and thought leadership. Contact Evan here.