Recurring Revenue (ARR/MRR) as Central Metric
Software companies are valued by recurring revenue (ARR – annual recurring revenue). A SaaS with 1 million euros ARR at 90% net retention (self-growing) is gold. A service business with 1 million euros revenue but only 20% recurring is different. Show: how much ARR? How much services/projects? How's net retention developing? These metrics determine valuation much more than total revenue.
Company with high, growing ARR is much more attractive to buyers than one with volatile service revenue.
Technical Debt Assessment and Code Quality
Buyers (PE, strategic) want to know: how healthy's your codebase? How much technical debt? Fragmented and brittle systems scare off; modern, robust architecture multiplies value. Commission independent code review; transparency builds trust.
Clean tech stack is major asset and significantly affects valuation.
Team Retention and Key Person Risk
Software companies are people-centric. CEO, tech leads, best engineers – are they bound? Or could they leave tomorrow? High turnover is risky; team with retention agreements and long-term incentives is asset. Show: team size, seniority mix, turnover rate. Plan team retention post-deal? That's critical.
Stable, bound team is strategic advantage and significantly increases valuation.
IP Ownership and Patent Situation
Does your company own all IP (code, designs, patents)? Or employees and external contractors? Hidden IP rights are deal killers. Clear IP ownership is condition. Show: code fully yours? Any open-source license dependencies? Clean IP landscape is sale advantage.
Full IP ownership is basic prerequisite for successful sale.
Customer Churn and Contract Security
How stable's customer base? What churn rate (monthly or annually)? SaaS with 5% monthly churn is different from 1%. Long-term contracts (annual, multi-year deals) are security. Show: churn trend over 2+ years, average contract length, top customer stability.
Low churn with stable, long-term contracts appeals to buyers.
VALENTYR VOS for Tech Company Valuation
SaaS and IT are complex: ARR, churn, team risk, tech debt all need balance. VOS Standard disaggregates ARR vs. services, quantifies churn scenarios, values tech debt costs, measures team risks. With VOS Autopilot (from 149€/month), update monthly – critical for fast-moving tech.
For larger firms (>750k revenue), VOS Assessment (3,500€) delivers comprehensive scenario analyses: how does company value shift at different churn, growth, integration scenarios? Which KPIs need improvement for certain exit multiple? Buyers (PE, strategic, investors) see in 6–9 weeks data-supported, traceable valuation model – not hope but facts. That speeds deals and improves prices.