Whether you are an Investor or an Entrepreneur in the Software as a Service –SaaS sector, one critical piece of information to inform the valuation of a company is the benchmark multiple from publicly traded companies. This interactive tool is continuously updated with key financial indicators of the Top Software as a Service (SaaS) Companies.
Software as a Service –SaaS
Software as a service (SaaS) is a cloud-based application delivery and consumption model where users pay for software depending on their usage, the number of licenses, and the product features used. It offers predictable recurring revenues for the companies and on-demand customer scaling efficiencies.
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The Valuation of SaaS Companies as a Multiple of their Annual Revenue
When defining the value of private SaaS companies, an essential reference number is the Valuation Multiple of publicly traded SaaS companies. This Valuation Multiple is defined as the Market Capitalization divided by the Annual Revenue. Hence a Company with a Market Cap of $500M and annual Revenues of $100M is said to be valued at 5X Revenues.
Most methods add adjustments based on the Annual Growth Rate, Net Revenue Retention, Profitability (or free cash flow generated or loss) Gross Margin, and Annual Contract Value compared to the Average Customer Acquisition Cost, including deployment service expenses.
Most methodologies include a variation of the Rule of 40. The Rule of 40 is a score that combines growth rate and profit margin. So if a business is not growing fast but is profitable, it is as good as a business growing super fast but still unprofitable.
You can see how this multiple is used to calculate the valuation of a SaaS company by visiting our Free Online Calculator to Define the Valuation of a SaaS Company
The interactive tool on this page, updated daily, shows the Valuation Multiple of the Top 50 Public SaaS Companies in the US. We excluded companies such as Microsoft (MSFT), Google (GOOGL), Amazon (AMZN), and Apple (APPL), as those companies generate a large amount of their income from non-SaaS-related sources. We also excluded Telecom and Tech-enabled Services Companies.