01Two valuation methods with different meanings
The default method applies SaaS Capital’s 2022 private-company framework: predicted ARR multiple = −3.2 + 0.32 × SCI + 8.26 × ARR growth + 2.62 × NRR. Growth and NRR are decimals in that equation. Multiplying the result by ARR produces an illustrative company value on the same market-capitalization basis as the SaaS Capital Index.
The custom method is deliberately separate. It multiplies ARR by an EV/ARR assumption that you choose, then subtracts debt and adds cash to estimate equity value. Cash and debt are not applied to the SaaS Capital result because its index does not make that enterprise-value adjustment. Neither result is an appraisal, offer or substitute for transaction diligence.
Worked default: $2,400,000 ARR, 60% growth, 118% NRR and 4.22× SCI give −3.2 + 1.3504 + 4.956 + 3.0916 = 6.198×, or $14,875,200.
02Use a dated SCI observation, not a live-rate claim
SCI is the median ARR multiple for the B2B pure-play companies in the SaaS Capital Index. SaaS Capital describes it as market capitalization divided by annualized current run-rate revenue. The calculator ships with an editable 4.22× default, rounded from the official workbook observation of 4.217195282051595× dated September 30, 2026.
That bundled value is a dated assumption, not a live market feed. Replace it with the median from the current SaaS Capital Index when you run a new analysis. The source refreshes its index periodically; this calculator does not claim that a multiple changed today or poll it automatically.
- Published input domains: SCI 3.5×–16.9×, ARR growth −16%–264%, and NRR 72%–156%.
- Published output caution: predicted multiples outside 0.5×–27× are outside the original model’s observed range.
- The official worked example uses $5M ARR, 40% growth, 105% NRR and 9.1× SCI to obtain 5.767× and approximately $28.8M.
03ARR, MRR, growth and NRR must use consistent periods
ARR is recurring subscription revenue expressed for one year; MRR is the monthly equivalent, so ARR = MRR × 12. Exclude one-time setup, services and other non-recurring revenue. Enter actual signed trailing year-over-year ARR growth. Negative growth is valid and reduces both the published model multiple and net-new ARR.
NRR compares recurring revenue from the same starting customer cohort after expansion, contraction and revenue churn. It is not logo retention and not gross margin. A value of 105% means that cohort retained and expanded to 105% of its starting recurring revenue; 95% means it contracted. Use the same cohort and annual period as the growth input.
At $2.4M current ARR and 60% growth, derived prior-year ARR is $1.5M and net-new ARR is $900,000. At −100% growth, prior-year ARR is not derivable and the calculator reports N/A.
04Rule of 40 is growth plus profit margin
Rule of 40 = revenue growth percentage + profit margin percentage. SaaS Capital commonly discusses profit as EBITDA margin, while other analyses use operating or free-cash-flow margin. Choose one definition, label it in your own records and keep its period consistent with growth. Gross margin is not a substitute for profit margin.
The default example is 60% growth plus −10% profit margin, giving 50%. Forty is a reference threshold, not a grade or proof of business quality. It also does not alter the sourced SaaS Capital multiple because the published formula does not contain profit margin.
05Burn multiple and S&M payback are separate diagnostics
Burn multiple = net cash burned ÷ net-new ARR. Net-new ARR = current ARR − derived prior-year ARR. With $900,000 of annual net burn and $900,000 of net-new ARR, the default burn multiple is 1.00×. If net-new ARR is zero or negative, the ratio is not meaningful and the calculator returns N/A rather than infinity or a flattering zero.
The S&M payback proxy = annual sales and marketing spend ÷ (net-new ARR × gross margin) × 12 months. The default uses $1.2M S&M, $900,000 net-new ARR and 81% gross margin, giving about 19.8 months. This is a company-level proxy, not customer-level CAC divided by customer gross profit. Monthly logo churn is compounded separately into annualized logo churn and is not substituted for NRR.
06Sensitivity and fundraising dilution answer different questions
The sensitivity table recalculates the selected valuation method at the selected multiple and at ±1× and ±2×, without allowing negative scenario multiples. These are arithmetic scenarios, not a statistical confidence interval, likely deal range or set of claimed market comparables. In the custom method, each enterprise value also receives the same debt/cash bridge so you can inspect equity value.
For fundraising, the selected positive equity basis becomes pre-money value. Post-money = pre-money + new investment, and investor ownership = investment ÷ post-money. To target a chosen dilution percentage, required post-money = investment ÷ target dilution, and required pre-money = post-money − investment. A zero investment or nonpositive selected equity basis produces N/A where the requested calculation is not meaningful.
Customer concentration, contract terms, product durability, founder dependence, legal rights and buyer-specific synergies remain outside the formulas and can materially change a real transaction.