Using EBITDA multiples for SaaS companies is a tricky valuation method, because so many SaaS companies have negative EBITDA.
SaaS companies aren’t like industries that have been around for a long time that have been reasonably stable enough to value using a certain multiple metric like a sales multiple or an EBITDA multiple.
And, there are a myriad of other factors that affect the success of SaaS companies and also other metrics that are more relevant in valuing SaaS companies.
Having said that, for those who are curious about EBITDA multiples for SaaS companies, I pulled that data and here it is below.
EBITDA Multiples for SaaS Companies
Some methodology notes:
- Companies with negative EBITDA were eliminated from the data set
- Outliers with EBITDA multiples smaller than 1.0x and larger than 30.0x were eliminated from the data set
- I looked up EV / EBITDA multiples for 2 sets of data: (1) public SaaS companies and (2) recent M&A transactions and investments
- I wanted to compare the median EBITDA multiples for these 2 sets of data to see if they can be corroborated
Here are the findings:
As you can see from two different sets of data, the median EBITDA multiples for SaaS companies are within close range of each other.
For public companies where 95 SaaS companies were analyzed, the median EBITDA multiple is 11.7x whereas looking at recent M&A transactions, the median EBITDA multiple is 11.1x.
Other SaaS Business Valuation Multiples
Before we get there, here are a few articles I recommend for measures you can use to value SaaS companies other than EBITDA multiples.
- SaaS metrics how to value a SaaS business
- Private SaaS company valuations
- Revenue multiples for SaaS businesses
How To Use Valuation Multiples To Value a Company
For those who are not familiar with using valuation multiples to value companies or those who are but need a refresher, I wrote posts detailing exactly how you can do that.
Hopefully you can use them as helpful guides. Click on the link below to go to the post.