What Are ARR Multiples?
An ARR multiple (Annual Recurring Revenue multiple) is the ratio of a business's sale price to its annual recurring revenue. It's the most common metric used to value subscription-based businesses.
For example, if a SaaS business generates $100,000 in ARR and sells for $350,000, its ARR multiple is 3.5x.
What Affects ARR Multiples?
- Growth rate — faster-growing businesses command higher multiples.
- Churn rate — lower churn means more predictable revenue.
- Profitability — higher margins increase valuation.
- Market size — larger addressable markets attract premium valuations.
- Business model — SaaS typically commands higher multiples than e-commerce or content businesses.
Related Tools
- SaaS Valuation Calculator — estimate your business value
- How Much Does a SaaS Business Cost?
- Weekly Market Snapshots