Calculating ARR Multiple
If a company is valued at $5 million with an ARR of $1 million, the ARR Multiple is 5.
- Valuation:
- 5000000
- ARR:
- 1000000
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Fundraising⚗ Includes simulator
ARR Multiple
ARR Multiple is a valuation metric based on annual recurring revenue.
Deep dive
ARR Multiple is used to assess the valuation of a SaaS company based on its annual recurring revenue. It's often used in fundraising to justify a valuation. However, it can be influenced by external factors like market conditions.
Key formula
ARR Multiple = Company Valuation / ARR
Real-world examples
Pitfalls to avoid
- Ignoring market variations.
- Using unadjusted ARR for churn.
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