A breakdown of how buyers value SaaS businesses using EBITDA multiples and revenue multiples. Learn the financial methods that determine what your company is actually worth when someone wants to buy it.
Now, here's the most common valuation methods. These are three main ways buyers value a business. The first is going to be EBITDA multiples. This is most common for profitable businesses. EBITDA equals earnings before interest, taxes, depreciation and amortization. That's a big one. Buyers typically will pay three to six times EBITDA for SaaS businesses or other online businesses. As an example. This means if your business is generating 500,000 per year in net profit, your business could be worth between 1.5 million to $3 million, which is massive. And other factors still include growth, risk, industry trends, stuff like that. The second would be revenue multiples. Now, this is for high growth SaaS startups. This is for businesses growing between 100% and above per year. Absolutely. Just going through the roof with growth. And this is because the business is growing so fast it's not yet profitable. Everything is being reinvested to continue the growth rate.
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