Module II· Multiples & Sector SpecificsBasic
Question
Which multiples are standard for software / SaaS companies?
Answer
Standard for SaaS
- EV/Revenue: the primary multiple for pre-profitability names, 5–15x depending on growth
- EV/ARR (annual recurring revenue): more precise, weighting recurring vs. services
- Rule of 40: growth % + EBITDA margin % ≥ 40 as a quality signal
- EV/EBITDA for profitable SaaS: 15–25x (higher than industrials because of growth)
- Net revenue retention (NRR): a quality driver, not a multiple
Regional differences
some markets show less EV/Revenue hype, with multiples typically 30–40% lower than US peers.
Pitch tip
Always show the Rule of 40 as a cross-check — it prevents hype without profit underpinning.