ARR multiple

An ARR multiple is how much a SaaS business is worth expressed as a multiple of its annual recurring revenue. A company doing one million in ARR valued at eight million is trading at an 8x multiple. It's the shorthand the software market uses to price companies, because recurring revenue is predictable enough to value as a stream rather than a one-off. The multiple isn't fixed: it stretches with growth rate, gross margin, and retention, and compresses when those soften or when the wider market cools. For a lean founder, the ARR multiple is a reality check on what your company is actually worth, and a lever you control through fundamentals. A business growing 100% a year with strong net retention earns a far richer multiple than one limping along at 20%. Chase the inputs that move the multiple, namely durable growth and customers who stay, rather than the headline number itself.