How we value small SaaS businesses
If you're asking “how much is my SaaS worth?”, the honest answer is that it depends on a handful of fundamentals, and any buyer worth working with should show you exactly how they got to their number.
This is how The North Yard looks at a small SaaS or subscription business before making an offer, what tends to raise or lower a valuation, and how to get a realistic number for your own product.
Profit or revenue?
Small, owner-run SaaS businesses are usually valued on the profit they produce for their owner. Larger, fast-growing companies are more often valued on revenue. For most micro-SaaS products, what matters is how much reliable profit the business generates and how confident a buyer can be that it will continue.
The fundamentals we price on
- Revenue quality. Recurring subscription revenue is worth more than one-time sales, and steady revenue is worth more than lumpy revenue. We look at the history, not just the latest month.
- Retention and churn. How many customers cancel each month is often the single biggest driver of value. Low churn means the revenue you have today is likely to still be there next year.
- Margins. What it costs to run the product: hosting, tools, contractors, and support. A business that needs little to keep running is worth more.
- Product health. Whether the code is maintained, the product is stable, and it still does its job well for customers.
- Dependencies. Revenue that relies on one marketing channel, one platform, or one large customer carries more risk than revenue spread across many.
What lowers a valuation
- High monthly churn, or a subscriber base that mostly never renews
- Frequent refunds or payment disputes
- Revenue that depends heavily on discounts, affiliates, or a single traffic source
- Listed revenue that the pricing page and payment data can't support
- A product that hasn't been maintained in a long time
What raises a valuation
- Customers who stay for a long time
- Several independent ways customers find the product
- A low support burden and simple operations
- Clean, verifiable data from the payment processor
- A product that clearly does one job well for a specific audience
Why we don't use a fixed formula
Valuation multiples are a useful market shorthand, but two businesses with the same profit can be worth very different amounts depending on churn, dependencies, and product health. We price each business on its own numbers.
When we make an offer, you get the number and the reasoning behind it. If something in the data changes our view, we'll tell you what and why, rather than quietly shrinking the offer every time we talk.
How to get a realistic number for your SaaS
- Pull your revenue history from your payment processor, month by month.
- Work out your monthly churn and how long a typical customer stays.
- List your monthly costs to run the product, including your own time if you'd need to replace it.
- Note where your customers come from and whether any single source dominates.
- Send it to a buyer who will explain their number. We're happy to do that.
Frequently asked questions
Is a small SaaS business valued on revenue or profit?
Small, owner-run SaaS businesses are usually valued on the profit they generate for their owner, while larger, fast-growing companies are more often valued on revenue. For micro-SaaS, reliable profit and low churn matter more than top-line growth.
How much does churn affect what my SaaS is worth?
A lot. Monthly churn tells a buyer how much of today's revenue will still exist next year. Two products with the same revenue can be valued very differently if one keeps its customers and the other replaces most of them every few months.
Will The North Yard explain how it arrived at an offer?
Yes. Every offer comes with the reasoning behind it, based on your revenue, retention, margins, and product health. If new information changes our view during diligence, we tell you exactly what changed and why.