How Much Is My SaaS Worth? A Founder's Guide to Valuation

The most common question from founders thinking about an exit isn't complex. It's simple: how much is my SaaS actually worth?

The answer is also simple, but most founders get it wrong because they skip the framework and jump straight to a number. This guide walks you through the real formula, the factors that move your multiple, and the mistakes that cost founders six figures in lost valuation.

The Formula: SDE × Multiple × 12

Every indie SaaS valuation starts here. There's no magic beyond it.

Annual SDE (Seller's Discretionary Earnings) is your monthly profit, plus any costs a new owner genuinely won't inherit, multiplied by 12.

The multiple is what we covered in our analysis of 105 real exits with a disclosed profit multiple: median 2.5×, with the middle half between 1.7× and 3.0× depending on factors we'll detail.

× 12 converts monthly profit to annual.

The formula: Sale Price = (Monthly Profit + Legitimate Add-Backs) × Multiple × 12

Example: a SaaS with $3,000/month profit, no add-backs, and a 3.0× multiple = $3,000 × 3.0 × 12 = $108,000 asking price.

That's the starting framework. Now let's build your specific multiple.

How to Estimate Your Multiple

Start with the 2.5× median (2.8× for SaaS alone). Then adjust based on each factor below. For each factor, ask yourself honestly: does my business have this advantage (add), disadvantage (subtract), or is it neutral (no change)?

### Retention and Growth Signals (Most Important)

Net Revenue Retention above 100%? Add +0.4 to +0.8× to your multiple. This is the strongest signal you have. Existing customers expanding spending without new acquisition effort is gold to a buyer.

Monthly churn below 3%? Add +0.2×. Above 5%? Subtract -0.3×. Churn is the metric buyers obsess over because it determines your actual future revenue, regardless of your MRR snapshot.

Growing MRR (last 3 months)? Add +0.2 to +0.4×, depending on consistency. Flat MRR gets no bonus. Declining MRR? Subtract -0.3 to -0.6×.

### Acquisition Channel Quality

Primarily organic (SEO, word-of-mouth, product-led)? Add +0.3 to +0.5×. This is repeatable and low-cost, so a buyer inherits a working machine.

Mix of channels (some paid, some organic)? No adjustment. Neutral.

Primarily paid ads (Google, Facebook, etc.)? Subtract -0.2 to -0.3×. Buyers are buying a revenue stream that requires ongoing capital to maintain.

Single-platform or single-campaign dependent (AppSumo, Product Hunt spike, one partnership)? Subtract -0.4 to -0.6×. Not repeatable.

### Owner Dependency

Fewer than 5 hours/week of founder involvement? Add +0.3×. This is a business, not a job.

5–15 hours/week? No adjustment. Typical.

15–20 hours/week? Subtract -0.2×. Becoming a job.

More than 20 hours/week? Subtract -0.5 to -0.8×. You're not selling a business; you're selling your job.

### Customer and Revenue Concentration

No customer is more than 15% of revenue? Add +0.2×. Diversified revenue is lower risk.

Top customer is 15–25% of revenue? No adjustment.

Top customer is 25–40%? Subtract -0.2 to -0.3×. Buyer models its loss.

Top customer is 40%+? Subtract -0.5 to -0.7×. Highly risky.

### Technical and Operational Maturity

Clean codebase, good test coverage, documented deploys? Add +0.2×.

Some technical debt but manageable? No adjustment.

Known major technical debt (no tests, fragile architecture)? Subtract -0.2 to -0.3×.

Documented processes, data room ready, clean financials? Add +0.2 to +0.3×. This isn't flashy, but buyers pay for it.

A Worked Example

You have: - $4,000/month profit - 105% NRR - 2% monthly churn - Flat MRR (last 3 months) - 70% of revenue from SEO - 8 hours/week founder involvement - Top customer is 18% of revenue - Clean codebase, documented processes

Base (example value, not a live figure): 2.85× + 0.5× (NRR > 100%) + 0.3× (churn < 3%) + 0.35× (organic-heavy channels) + 0.3× (5-15 hours/week, so no subtraction, but let's say +0.1× for being on the lean side) + 0.2× (customer concentration is fine) + 0.2× (technical cleanliness) = 4.70× multiple

Sale price: $4,000 × 4.70 × 12 = $225,600

The Add-Back Trap

One place founders consistently hurt themselves: inflating SDE with aggressive add-backs. Legitimate add-backs include:

• Your salary (that the buyer will replace with staff or a contractor)
• One-time legal or accounting fees
• Unusual business expenses (a one-time conference, a contractor brought in to fix a specific problem)

Red flags that destroy buyer trust:

• Personal expenses: a car, home renovations, personal subscriptions
• Vague "consulting" or "professional development"
• Anything you can't explain in one sentence why a new owner won't pay it

Every aggressive add-back creates doubt about your entire data room. Conservative add-backs signal honesty. Be conservative.

Common Mistakes That Cost You Multiples

1. Forgetting the 12× multiplier. Many founders quote a monthly multiple ("I'm at 3×"), meaning $3K profit × 3 = $9K/month valuation. But buyers think in annual multiples. $3K/month × 3.0× × 12 = $108K. Not $9K.

1. Assuming multiples are negotiable up. They're not. Multiples compress during due diligence, not expand. If you ask for 4.5× and the buyer sees declining churn or undisclosed customer concentration, you'll get 2×. Start with a realistic multiple.

1. Not documenting your add-backs. If you claim $1K/month add-backs, have the receipts. Unsupported add-backs are simply deleted.

1. Ignoring the multiple range. There's no "magic" multiple. If you're at 2.5×, asking for 5× without the metrics to support it will get you walked from by serious buyers. Stay within 0.5× of your justified multiple.

1. Conflating revenue multiples with profit multiples. If you're at $20K MRR and see a "$50K revenue" exit for what looks like $500K, that's probably a 2.5× revenue multiple ($20K × 12 × 2.5 = $600K), not a price multiple. Most indie SaaS are priced on profit multiples, not revenue multiples.

Your Next Steps

1. Calculate your real SDE (conservative).
2. Use the framework above to estimate your justified multiple.
3. Multiply: (SDE) × (your multiple) × 12 = realistic asking price.
4. Test the number with the [free valuation calculator](/valuation).
5. Browse comparable exits on [the stats page](/stats) to find businesses like yours and see what their actual multiples were.
6. Read [what buyers actually look for](/blog/what-buyers-look-for-in-a-micro-saas) to understand where your discount or premium comes from.

The goal isn't to guess a number; it's to build a defensible one that buyers will take seriously. Every factor above is something a buyer will model in their due diligence. Walking in with a number grounded in data and clear reasoning is how you keep the deal on track.