How is a SaaS company valuation calculated?
SaaS companies are valued using the formula: Valuation = ARR × Multiple. ARR (Annual Recurring Revenue) is your MRR × 12. The multiple typically ranges from 2× to 8× for bootstrapped and early-stage SaaS, and is driven by monthly churn rate, month-over-month growth, and Net Revenue Retention (NRR). Use the calculator above to get an instant estimate based on your own numbers.
What ARR multiple should I use in my SaaS valuation?
For SMB-focused B2B SaaS, the ARR multiple typically ranges from 2× (high churn, slow growth) to 6–8× (under 1% monthly churn, strong MoM growth). The most common range for a healthy SMB SaaS is 3–5×. Monthly churn is the single biggest driver — a business with 1% monthly churn will earn a far higher multiple than the same business at 5%, even with identical MRR.
What is a good churn rate for a SaaS company?
For SMB-focused SaaS, a monthly churn rate below 2% is considered good, 2–5% is average, and above 5% is high. Annual churn above 60% makes a SaaS business very difficult to value or sell at a reasonable multiple. Reducing churn has a compounding effect — it improves revenue retention and directly increases the ARR multiple applied in any SaaS valuation.
How much is my SaaS worth?
Your SaaS valuation depends on your ARR and the multiple a buyer would apply based on your retention and growth profile. As a rule of thumb: a $10K MRR SaaS with 2.5% monthly churn and 5% MoM growth is typically valued at $480K–$720K. Use the SaaS valuation calculator above to get an instant estimate based on your own metrics.
What is the difference between MRR and ARR in a SaaS valuation?
MRR (Monthly Recurring Revenue) is the normalized monthly subscription revenue. ARR (Annual Recurring Revenue) is simply MRR × 12. SaaS valuations are almost always expressed as a multiple of ARR because it gives a full-year view of the business's revenue base. When you enter your MRR above, the calculator automatically converts it to ARR before applying the multiple.
Does churn really affect my SaaS valuation multiple?
Yes — churn is the single biggest driver of the ARR multiple in a SaaS valuation. A business with 1% monthly churn may command a 6× multiple, while the same business with 5% monthly churn might only attract a 3× multiple. That difference means the same ARR generates twice the valuation purely from improved retention. See the "How to improve it" tab for a full breakdown at your current ARR.
What is Net Revenue Retention (NRR) and why does it matter?
NRR measures how much revenue you retain and grow from existing customers over time. An NRR above 100% means existing customers are generating more revenue through upgrades or upsells — even before new customer acquisition. Buyers reward high NRR with a higher ARR multiple because it signals a product customers genuinely value and expand their use of. For lead attribution SaaS like leadsources.io, seat expansion and plan upgrades are the main NRR drivers.
How is SaaS valuation different from traditional business valuation?
Traditional businesses are often valued on EBITDA multiples (profit × multiple). SaaS companies are valued on ARR multiples because recurring revenue is predictable, scalable, and carries high gross margins. A SaaS business at break-even with strong ARR growth and low churn is often worth significantly more than a profitable but slow-growing traditional business — because buyers are paying for future revenue potential, not just current profits.
