The Ultimate SaaS Company Cheat Sheet

Software as a service (SaaS) companies are trending on Wall Street. Sixteen SaaS companies IPO’ed on Wall Street in 2020 amidst a global pandemic.

However, you shouldn’t measure SaaS companies performance using on the traditional standard metrics alone. These companies have a specific business model based on subscription revenue, which requires different metrics.

In this cheat sheet, you can discover the most popular SaaS metrics and their formulas.

In the article below, you can read more over the rationale behind each metric.

Valuation 💰

• EV / NTM Revenue

Definition

Enterprise value divided by the next twelve months revenue

Rationale

SAAS companies operate usually in high growth industries or rapid growing markets. Therefore, you shouldn’t use historical revenue to value the company since it isn’t a good proxy of future revenue. Using the management forecasts of the next twelve months can be preferred.

• EV / Last quarter implied ARR

Definition

Enterprise value divided by annual recurring revenue

Rationale