Revenue Multiple
What is Revenue Multiple?
A revenue multiple divides a stated company value by a stated revenue measure. This calculator uses ARR; comparisons using trailing revenue or a different valuation basis must be reconciled first.
A revenue multiple is meaningful only when both the value numerator and revenue denominator are identified. This calculator divides a user-provided company value by ARR. It does not choose a market multiple or establish whether enterprise value, equity value, trailing revenue, or forecast revenue is appropriate for a transaction.
Also known as: ARR Multiple, EV/Revenue
Formula
Revenue Multiple = Valuation / ARR | Variable | Meaning |
|---|---|
Valuation | Company valuation (enterprise value for public comparisons). |
ARR | Annual recurring revenue. |
How to use it
- Write down what the company value represents: enterprise value or equity value, its measurement date, and its source.
- Choose the revenue basis. For this calculator, enter annual recurring revenue measured consistently at the relevant date.
- Divide value by ARR and label the output with both bases. Keep cash and debt adjustments separate and visible if converting between value definitions.
Worked example
Hypothetical worked scenario
A fictional company is discussed at $16 million enterprise value with $2 million ARR. It holds $1 million cash and has $3 million debt.
Enterprise value / ARR = $16 million ÷ $2 million = 8×. A simplified equity bridge gives $16 million + $1 million − $3 million = $14 million, or 7× ARR.
The 8× and 7× figures describe different numerators. A peer table that mixes them would make identical operating businesses appear to trade at different multiples.
Calculate with your numbers
Revenue Multiple = Valuation / ARR | Variable | Meaning |
|---|---|
Valuation | Company valuation (enterprise value for public comparisons). |
ARR | Annual recurring revenue. |
Worked example
- Company Valuation
- $16,000,000
- ARR
- $2,000,000
- → Revenue Multiple (× ARR)
- 8
Enable JavaScript to use the interactive calculator.
Open the Revenue Multiple calculator for a focused view of the inputs.
What the result tells you
Before borrowing a multiple from an index, read its methodology. For example, the linked SaaS Capital Index describes a market-capitalization numerator and an annualized revenue denominator. That is useful context, but not automatically interchangeable with enterprise value divided by subscription ARR.
Assumptions and common mistakes
- The example multiple is hypothetical and is not a current market benchmark.
- ARR and trailing recognized revenue can differ; label which one you use.
- A zero ARR denominator provides no finite multiple. Pre-revenue businesses require another approach.
Frequently asked questions
Does a high revenue multiple mean a better business?
It means more value is being assigned per unit of the chosen revenue measure. Expectations, risk, liquidity, and the measurement basis can all affect that ratio.
Can I use a public-company multiple for a small private company?
Only with careful consideration of differences in size, liquidity, growth, and revenue quality. This calculator supplies arithmetic, not those adjustments.
Sources and methodology
The references below explain the underlying methods. Our worked scenarios use hypothetical figures; they are not company results or current market benchmarks.
- SaaS Capital Index methodology
An example of a valuation multiple with a specifically defined numerator and revenue basis.
Found an error or a definition that differs from your reporting? Send a correction with the page URL and the method you use.