SaaS Valuation Methods: ARR Multiple, DCF, Comparables

There are three main methods to value SaaS businesses: revenue multiples (ARR/MRR multiple), discounted cash flow (DCF), and comparable analysis (comps). The multiple method is the most common and practical, using annual recurring revenue (ARR) or monthly (MRR) multiples based on comparable transactions. Multiples range from 2x to 10x depending on factors such as growth, margin, churn, and quality. The DCF method projects future cash flows and discounts to present value, being more complex but theoretically more accurate. Comparable analysis uses similar transactions as reference. This guide details each method, when to use each, how to calculate, advantages and disadvantages, and how to combine methods for a more robust valuation. We include practical examples, calculators, case studies, and analysis templates.