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.
Thanks a lot for your help! Great great help! by any chance you have an analysis on insurance companies?
Thanks for your comment! Great idea; I will add that to the list and produce the analysis on insurance companies soon!
Very beautiful article. Thanks for sharing the information regarding EBITDA Multiples for SaaS Companies. It is really helpful for me. I believe SaaS is the future of online business.
This blog post would potentially be very helpful to me if I knew when it was written.
Thanks for comment, Dave! All the articles pertaining to data set analyses and average multiples on this website are up to date within the last 12 months. Some articles were initially written as early as 2019, but I update them annually as especially in the last 2 years, there have been crazy fluctuations.