How to value a SaaS business in 2026

For small SaaS (under about $1M ARR), buyers value on Seller Discretionary Earnings — SDE — multiplied by a market multiple. SDE is TTM profit plus the owner's replaceable salary, plus one-off expenses. Current market SDE multiples for profitable SaaS: 2.6x to 4.2x, with the top of the range reserved for >20% YoY growth, <2% monthly churn, and under 10 owner-hours per week.

Between $1M and $5M ARR, buyers switch to ARR multiples for growth stories (2x–6x ARR depending on rule-of-40) and EBITDA multiples for mature/plateaued ones (5x–9x). Above $5M ARR, expect DCF and comparable-company analysis from PE-style buyers.

1. Owner comp normalization. If you don't pay yourself, buyers subtract a market salary for your replacement. 2. One-off revenue. Big annual pre-pays or a one-time enterprise deal get removed. 3. Concentration discount. If any customer is >10% of revenue, expect a 10–20% multiple haircut. 4. Tech-debt discount. Buyers walk if a rewrite is needed inside 12 months. 5. AI dependency. Heavy OpenAI / Anthropic reliance now gets a 0.3–0.6x haircut. 6. Founder-as-channel. If growth comes from your personal Twitter, it doesn't transfer.

DraftLoop is a $28.4k MRR, $298k TTM, 7.2% MoM growth AI SaaS. SDE after normalizing a $110k founder salary is $148k. Base multiple in current market: 3.4x. Bumps: +0.4x for growth, +0.3x for verified metrics, −0.2x for OpenAI dependency. Final multiple: 3.9x. Implied valuation: $577k. Actual close: $685k after a competitive process with two buyers.

Clean Stripe with 24+ months of history. Sub-3% net monthly revenue churn. Zero founder-only knowledge (documented Loom walkthroughs of every workflow). Owned distribution channel (SEO or paid, not personal social). Standard tech stack a solo dev could take over in a weekend.

Sub-$500k deals on how to value a SaaS business clear at 2.6x–3.8x SDE, with a discount for owner-hours over 20/week and a premium for MRR concentration above 70%. The $500k–$2M band sees 3.5x–5.2x SDE or 2.8x–4.5x ARR — buyers pick whichever framework flatters the deal less.

Levers that actually move the number: 5-point NRR improvement is worth 0.4x–0.7x; each 10 points of sustainable YoY growth adds ~0.5x; owner-independence buys 0.5x–0.9x; single-customer exposure above 25% costs 0.3x–1.0x. Anchor every claim to a comparable deal that closed in the last two quarters, not 2021 vibes.

On how to value a SaaS business, the first 30 days after close should be about not breaking anything. Run the seller's cadence, ship no new features, change no vendors, send no ‘new owner' email the seller didn't co-sign. You paid for a working machine — don't take it apart on day two.

Days 31–60 are the audit: read 12 months of support tickets, sit on a sales call, watch a churn call, look at the actual bank-statement expense pattern. Days 61–90 are your first small change — one process improvement the previous owner had been meaning to make. That rhythm becomes your operating model.

The 2026 median on how to value a SaaS business is 80% cash at close, 10–15% seller note over 18–24 months at prime + 2.5%, and 5–10% in escrow for 3–6 months. Straight cash usually costs the buyer a 5–10% premium — worth it for speed on small deals but painful in a competitive process.

Earn-outs align incentives on paper and poison transitions in practice. Only use them tied to metrics the buyer cannot easily manipulate (existing-customer renewal, gross bookings, delivered volume). Keep any earn-out under 20% of price and under 18 months, or plan on litigation.