EvalyMe Valuation Methodology
At EvalyMe, we use a comprehensive methodology to calculate digital product valuations based on industry standards, market comparables, and key performance metrics. This guide explains the factors considered in our valuation model.
Core Valuation Method
Our core valuation approach uses a multiple of Annual Recurring Revenue (ARR), adjusted based on your product's specific metrics and market conditions. For SaaS and subscription businesses, we typically apply a multiple between 4x and 6x ARR as a baseline.
Base Valuation Formula
Base Valuation = ARR × Industry Multiple (4-6x for SaaS)
This baseline is then adjusted up or down based on the strength of other key metrics.
Key Metrics and Their Impact
Monthly Recurring Revenue (MRR)
MRR is the foundation of your valuation. We annualize this figure (MRR × 12) to calculate ARR. Higher and more stable MRR leads to higher valuations.
Impact: Very High (30%)
Revenue Growth Rate
Monthly growth rate significantly affects your valuation multiple. Products growing at 15%+ monthly can receive valuation multiples 1.5-2x higher than the baseline.
Impact: High (25%)
LTV/CAC Ratio
This ratio measures customer acquisition efficiency. A healthy ratio of 3:1 or better suggests strong unit economics and can increase your valuation multiple.
Impact: Significant (20%)
Churn Rate
Monthly customer churn directly impacts long-term revenue stability. Products with churn under 5% are valued more highly, while high churn (10%+) can significantly reduce valuation.
Impact: Moderate (15%)
Profit Margin
Higher profit margins demonstrate operational efficiency. SaaS businesses with 40%+ margins typically receive premium valuations over less efficient operations.
Impact: Lower (10%)
Secondary Factors
Beyond the core metrics, these additional factors may influence your valuation:
- Market Size and Penetration: Products with larger addressable markets and low penetration have higher growth potential.
- Team Experience: Products led by experienced founders with relevant industry expertise often command higher valuations.
- Technology Stack: Modern, scalable technology stacks are valued higher than legacy systems requiring significant maintenance.
- Competitive Landscape: Products with strong competitive moats or unique positioning receive higher valuations.
- Customer Concentration: Products with diversified customer bases are valued higher than those dependent on a few large customers.
Industry-Specific Adjustments
Valuation multiples vary across different sectors. Here's how we adjust based on your product type:
SaaS & Subscription
Base multiple: 4-6x ARR
Higher for B2B, enterprise, vertical SaaS with strong retention
Marketplaces
Base multiple: 3-5x revenue
Valued on GMV, take rate, and network effects
Mobile Apps
Base multiple: 3-4x revenue
Higher for subscription apps with strong retention
Content & Media
Base multiple: 2-4x revenue
Valued on traffic, engagement, and monetization strategy
Data Sources and Benchmarking
Our valuation model is calibrated using multiple data sources:
- Public company SaaS multiples adjusted for size and stage
- Private acquisition data from industry M&A transactions
- Marketplace data from business brokers specializing in digital assets
- Annual benchmark reports from investment banks and VC firms
Note: While we strive for accuracy, valuations should be considered estimates. Actual selling prices depend on specific buyer-seller dynamics, market conditions at time of sale, strategic value to acquirers, and other factors beyond the scope of our model.
Improving Your Valuation
Based on our methodology, here are the most effective ways to improve your product's valuation:
Most Impactful Actions
- Increase Monthly Recurring Revenue (MRR)
- Improve monthly growth rate to 15%+
- Optimize LTV/CAC ratio to 3:1 or better
- Reduce monthly churn to below 5%
Secondary Improvements
- Increase profit margins above 40%
- Diversify customer base
- Document systems and processes
- Build a leadership team beyond founders
- Develop proprietary technology/IP