Most private software companies between $2M and $10M in ARR trade between 2x and 6x revenue. Where you land inside that range is decided by retention, growth and gross margin, roughly in that order.
Written by a buyer rather than an advisor, which means the incentive behind the numbers is the opposite of the usual one. We benefit from you having a realistic number, not an inflated one, and you can hold us to it when we make an offer.
Multiples of annual recurring revenue for private software companies sold to financial and permanent-capital buyers. Strategic buyers with a synergy case sit above these ranges and are not represented here.
In the order a buyer weighs them, with roughly what each one is worth. These are directional, not a formula, and no buyer adds them up in a spreadsheet exactly like this.
The largest single lever. A company that keeps and expands its customers can be owned indefinitely, which is exactly what a permanent-capital buyer is paying for.
Below 70% a buyer is really buying a services business with software attached. Above 80% the company funds its own roadmap, and that shows up in the price.
Matters, and less than most founders assume at this size. Twenty percent that is durable beats sixty percent bought with paid acquisition you can't sustain.
One customer above a quarter of revenue is priced as risk. Multi-year contracts and a renewal history reduce the discount rather than remove it.
If sales, support and deploys all run through you, the buyer is purchasing a job. A team that can run a week without you is worth real money.
Rarely adds to the price and frequently kills the deal. Unassigned contractor IP is the most common late problem we see, and it is completely avoidable.
Three bases get quoted and they aren't interchangeable. A 4x and a 4x can be a factor of five apart in dollars, which is how two honest people end up describing the same company differently.
Applied to annual recurring revenue. The default basis in software because it's the least manipulable number on the page and the easiest to verify from a billing export.
Used by: SaaS buyers, most acquirers in this band
Applied to earnings before interest, tax, depreciation and amortization. Used where the company runs at a real profit, which most growing software companies at this size do not.
Used by: Private equity, lower middle market funds
Seller's discretionary earnings: profit plus the owner's salary and personal expenses. Common on listing sites and below about $2M in revenue.
Used by: Marketplaces, individual buyers
A company with $4M ARR, 94% net revenue retention, 12% growth and 78% gross margin runs about $900K in owner earnings after a market-rate salary for the founder. On revenue that's roughly 3.2x, or $12.8M. On SDE it's about 4x, or $3.6M. Same company, same year, two numbers that are nowhere near each other. Ask any buyer which basis their multiple is quoted on before you compare it to anything.
Between 2x and 6x annual recurring revenue for most private companies under $10M in ARR, sold to financial or permanent-capital buyers. Retention sets the floor, growth sets the ceiling, and a strategic buyer with a genuine synergy case can pay above the range entirely.
Everything above is a starting point. If you want a real number for your company, send us the shape of the business and we'll come back with a range and the reasoning behind it, or a straight no, within two business days.
Curious is a long-term holding company that buys and grows software companies with empathy.
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