Hi. Looking for a primer/resources on SaaS valuation, modeling, etc. Looking to understand key metrics, why the industry uses EV/revenue multiples, what drives valuations, etc. Appreciate any resources or any explanations to the above questions. Thanks.
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A lot of the times you use revenue because the company doesn’t even have ebitda yet. Although more commonly you use ARR, not necessarily sales. For the firm I’m interning at, we don’t even look at profitability, all that matters is recurring revenue, because the companies are so scalable and the underlying product is so profitable (>70% gross margins) that we can reorganize the cost structure and raise prices (due to lack of commoditization) post acquisition to make the business generate a bunch of cash flow
ARR as in annual recurring revenue or run rate? Kinda confused with when to use which.
annual recurring revenue
It's annual run rate if you're talking about revenue for a period less than a year, usually 3 months or 1 month, that has been annualized. It’s annual recurring revenue if you are doing this same calculation but you’re only using revenue that is recurring (subscription based)
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