Problem
You want to figure out a good starting point for your valuation and multiplier
Solution
Use this step-by-step process to estimate a ballpark valuation for your SaaS
Quick links
Steps
We need to calculate earnings and multiple to get a ballpark valuation.
This will give you a starting point for your valuation but make sure you can back your estimate up with data.
The more, the better
Estimated value = (Earnings or Revenue) * multiple
Calculate Earnings or Revenue
Figure out your earnings:
If you’re a small business calculate
Seller Discretionary Earnings (SDE) SDE = (Revenue - OPEX - Cost of Goods) + Your Compensation
If you’re a bit bigger and have a management team, calculate
EBITDA by using one of the following two formulas:EDITDA = Operating Profit + Depreciation and AmortizationEDITDA = Net Profit + Interest + Taxes + Depreciation and AmortizationDon’t flip back and forth during the calculations, you need to be consistent
If you’re heavily investing in growth (SDE and EBITDA are 0): use your
RevenueBe prepared to back up this decision!
Your earnings or revenue 👇
Calculate the Multiple
Determine your evidence based multiple by:
Researching multiplies of similar businesses as your own (Crunchbase or other startup reports)
Decide where your company stands compared to those companies in terms of:
Churn
CAC
LTV
Your multiple 👇
Calculate your valuation
Estimated value = (Earnings or Revenue) * multiple
Your estimated valuation 👇
