Software businesses trade on a different physics than Main Street: recurring revenue, retention curves, and margin structure matter more than this quarter's top line. That cuts both ways — the multiples are the highest on this site, and so is the spread between a clean story and a messy one.
Wide-banded starting ranges from the same table our free valuation calculator uses — a broker review narrows them after seeing real financials:
| Segment | Typical range | What moves it |
|---|---|---|
| SaaS (under $2M ARR) | 3× – 5.5× SDE | Under $2M ARR. Net-retention + churn + concentration drive band; rule-of-40 sub-30 compresses. |
Buyers underwrite the revenue that stays without you selling anything new. Net retention above 100% means the base grows by itself; below 90% means the buyer is purchasing a leaky bucket and will price it that way. Get twelve clean months of cohort data before going to market.
One customer over 20–30% of ARR moves the conversation from price to structure — earnouts, holdbacks, contingent notes. If you can dilute concentration in the year before a sale, that work often returns more than any growth initiative.
Technical buyers will read dependency age, deploy cadence, test coverage, and key-person risk in the commit history. A business whose founder is the only person who can ship is a services business wearing a SaaS multiple — and diligence reprices it.
Recompute retention from raw invoice or billing-system exports, not the seller's spreadsheet. The most common adjustment in SaaS diligence is discovering that 'logo churn' and 'revenue churn' were quietly conflated.
Who can deploy? Who owns the infrastructure accounts? Who do the top ten customers actually email? If every answer is the founder, plan and price a long transition.
Integration depth, data gravity, and switching costs are durable; a feature list is not. A technical read of the product against its top competitors belongs in diligence, not after closing.
Small SaaS businesses (under $2M ARR) commonly trade in a wide band around 3–5.5× SDE, with net revenue retention, churn, and customer concentration driving where a specific business lands. The free valuation calculator gives a personalized starting range in minutes; a broker review narrows it after seeing real financials.
Serious ones do, or they bring someone who does. Dependency age, deploy cadence, test coverage, and how concentrated shipping ability is in one person all shape both price and deal structure. Sellers who prepare for a technical read do meaningfully better in diligence.
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