Valuing a Software & IT Services business
Software carries the highest multiples in the catalogue, and not because of hype: a good SaaS combines recurring revenue, extremely high margins and the ability to grow with no inventory or geographic ceiling. That is why a well-built software company can be worth twice as much as an industrial one with the same EBITDA.
Software & IT Services sector EBITDA multiples
| Low | Typical | High | |
|---|---|---|---|
| EBITDA multiple | 8,0x | 12,0x | 16,0x |
Source: Dealsuite H1-2025 · Period: H1 2025
Worked example
A business in this sector with EBITDA of €1,000,000 would have an indicative valuation between €8,000,000 and €16,000,000, applying the sector multiple range.
Example EBITDA
€1,000,000
Indicative valuation
€8,000,000 – €16,000,000
Illustrative calculation based on sector multiples. The real valuation depends on many other factors specific to your company.
What drives the value of a Software & IT Services business
Here the buyer looks at metrics that in other sectors do not even exist: MRR (monthly recurring revenue), churn, LTV/CAC and net revenue growth. A SaaS that retains clients year after year and grows within its existing base justifies the highest multiples on the market, and is often valued on revenue (not on EBITDA) when it is reinvesting in growth. The risk is the flip side: high churn, reliance on a single paid acquisition channel or a product that is easy to replicate all drag the multiple down.
What raises and lowers the multiple
Raise the valuation
- High, predictable recurring revenue (MRR/ARR)
- Low churn and expansion within the existing client base
- High gross margins (70%+) typical of software
- A product that is hard to replicate, with switching costs for the client
Lower the valuation
- High churn or revenue concentrated in a few accounts
- Reliance on a single paid acquisition channel
- A product that is easy to replicate or has no competitive moat
- A mix of custom services that reduces scalability
Frequently asked questions
- Why does software reach such high multiples?
- Because of the combination of recurring revenue, gross margins of 70-90% and almost unlimited scalability. Each new client adds barely any cost, so profit grows faster than turnover.
- Can a SaaS be valued on revenue instead of on EBITDA?
- Yes, it is common. If the company reinvests everything into growth and its EBITDA is low or negative by design, the market values it as a multiple of recurring revenue (ARR), provided that growth and retention justify it.
- What metric does a software buyer look at first?
- Retention: churn and revenue expansion within the existing base. A product that clients do not abandon and on which they spend more every year is what sustains a high valuation.
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