How do you value a B2B SaaS company?
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How do you value a B2B SaaS company?
There are three main ways to value a software-as-a-service company by examining the company’s earnings: SDE, EBITDA, and Revenue. Depending on your SaaS business’s profitability and maturity, you might pick one valuation method over another to give yourself a better multiplier.
Why is SaaS generally valued at such high multiples of revenue?
SaaS/Cloud businesses frequently charge a monthly subscription or some type of recurring fee. As the cloud model is becoming widely accepted, many SaaS/cloud companies are also growing very fast. Their fast growth coupled with recurring revenue is a major reason why their valuations are higher.
How do SaaS companies get valued?
A pure revenue-based valuation is based on growth rate. As mentioned earlier, SaaS businesses can prove their market fit and lasting power much quicker than other business models, thanks to the ever-lucrative MRR. The MRR growth month over month, year over year can be used to forecast future revenue growth.
How do I value my SaaS?
To determine what your private SaaS company is worth:
- Find the current revenue multiple of public SaaS companies growing at a similar rate.
- Subtract 2 to get the discounted private SaaS company multiple.
- Multiply your company’s trailing twelve month revenue by the discounted private SaaS company multiple.
Why software companies are valued so high?
Tech companies are also valued so high because they have a huge fan base that grows endlessly through word-of-mouth marketing. When a tech company has more users, it will use its size and reach to build products faster and better than smaller companies.
What are the valuation multiples for SaaS companies?
SaaS comps continue to be strong. Of the 120 SaaS companies we follow, the average public SaaS business is trading at 20.0x revenue while the median is 13.0x. The gap between the average and median is wider than ever at 7.1x, meaning premium SaaS companies are getting outlier valuations.
What is a SaaS reseller?
A SaaS reseller agreement involves a software services provider, known as the vendor, granting another business, the reseller, the rights to enter into a contract with a third party (customer) as the principal for providing the vendor’s services to the third party.
What is a B2B reseller?
A business-to-business (B2B) wholesale distributor refers to a business that moves products through the supply chain by purchasing from manufacturers and selling to retailers, other manufacturers, or assemblers. Customers of these goods have no choice but to purchase through the distributor.