Enterprise value (EV) is the total value of a business — what an acquirer would pay. For mature businesses, EV is often expressed as a multiple of EBITDA.
Enterprise Value = EBITDA × Multiple
Why SaaS uses ARR multiples, not EBITDA multiples
Early-stage SaaS typically has negative or near-zero EBITDA. Valuing a $2M ARR startup at 10× EBITDA when EBITDA is -$500k would give a negative valuation — clearly wrong.
So early-stage SaaS uses ARR multiples: typical range 5–15× ARR for growth-stage companies.
Once a company crosses into profitability (EBITDA > 0), acquirers and later-stage investors switch to EBITDA multiples.
EBITDA multiple ranges by profile
| Business profile | EBITDA multiple range |
|---|---|
| High-growth SaaS (40%+ ARR growth) | 15–25× EBITDA |
| Growth SaaS (20–40% ARR growth) | 8–15× EBITDA |
| Profitable SaaS (< 20% growth) | 5–10× EBITDA |
| Professional services | 4–8× EBITDA |
| B2B services / consulting | 3–6× EBITDA |
| Manufacturing | 3–5× EBITDA |
What drives a higher multiple
- Revenue growth: Faster growth commands a higher multiple.
- NRR > 110%: Strong retention and expansion signals durable economics.
- Gross margin > 70%: Software-like margins justify software-like multiples.
- Market size: Larger TAM = more growth runway = higher multiple.
- Competitive moat: Switching costs, network effects, IP.
How to use this for planning
If you're targeting an exit at $20M EV in 3 years, work backwards: - At 8× EBITDA: need $2.5M EBITDA - At 10% EBITDA margin: need $25M revenue - At your current growth rate: is $25M revenue achievable in 3 years?
Use the EBITDA Calculator to model your current EBITDA and implied valuation range.