Module II· Multiples & Sector SpecificsAdvanced
Question
How do you reflect net revenue retention (NRR) in SaaS multiples?
Answer
Mechanics
NRR = (starting ARR + expansion − churn − contraction) / starting ARR. It measures how the customer base develops over a year without new logos. >100% = net expansion, <100% = net contraction. Premium SaaS: NRR of 120%+ (Snowflake historically 150%+). Average SaaS: 105–115%. As a multiple driver, NRR is a central quality indicator — at 130% NRR a company can grow with no new customer acquisition → a higher multiple.
Rule of thumb
NRR premium ≈ 0.3–0.5x EV/Revenue per 10% NRR difference vs. the sector median.
Deep diveShow more details
Example
sector-median NRR of 110%, target NRR of 125% → a multiple premium of 0.5–0.8x.
Pitch tip
'Target NRR of 125% vs. a peer median of 108% — supports a premium of 8.5x EV/ARR vs. the peer median of 6.5x.'