Last updated: 5 August 2026.
Quick answer. ARR (Annual Recurring Revenue) is a metric that measures the recurring revenue a company expects to earn in a year. It is relevant for valuing a company because it indicates the ability to generate revenues in a predictable way: companies with a high ARR are more likely to be profitable and to grow. ARR is typically used to value businesses with subscription-based or recurring-payment models — SaaS companies, subscription services, media and telecommunications — while EBITDA remains the more relevant metric for traditional business models. The multiples applied vary by industry: indicatively, 20-30x ARR for SaaS companies, 15-25x for subscription services, 10-15x for media and 5-10x for telecommunications. These multiples are only a benchmark, since actual value also depends on EBITDA, net income, revenue growth, profit margin and risk.
ARR stands for Annual Recurring Revenue, which translates into Annual Recurring Revenue. ARR is a metric that measures the recurring revenue a company expects to earn in a year.
Why is it a relevant magnitude for valuing a company?
ARR is a relevant metric for valuing a company because it is an indicator of its ability to generate revenues in a predictable way. Companies with a high ARR are more likely to be profitable and to grow in the future.
What types of companies are valued by the ARR?
Companies that are typically valued by ARR are those that have a subscription-based or recurring payment business model. For example, SaaS companies, subscription service companies, media companies and telecommunications companies are often valued by ARR.
Why do investors value some companies by ARR and others by EBITDA?
Investors value some companies by ARR and others by EBITDA for different reasons. ARR is a more relevant metric for companies with a subscription-based or recurring payment business model, while EBITDA is a more relevant metric for companies with a traditional business model.
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What is a secondary in terms of a financial investor?
What multiples of ARR are usually applied?
The ARR multiples typically applied vary depending on the industry and the specific characteristics of the company. In general, ARR multiples for SaaS companies are higher than ARR multiples for companies in other industries.
Some examples of multiples of ARR are shown below:
- SaaS companies: 20-30x ARR
- Subscription service companies: 15-25x ARR
- Media enterprises: 10-15x ARR
- Telecommunications companies: 5-10x ARR
It is important to note that these multiples are only a benchmark, and that the actual value of a company is determined by a number of factors, including ARR, EBITDA, net income, revenue growth, profit margin and risk.
Conclusion and final advice
Not understanding how to value your startup can make you lose a LOT of money. Do not hesitate to consult a financial advisor or a commercial lawyer or M&A lawyer if you have any doubts.
If you enjoyed this article, you may also find it interesting to read the following one:
Why Finance Lawyers are Crucial to Startup Success
For advice applied to your case, see our Startups practice area.
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Frequently asked questions
ARR stands for Annual Recurring Revenue. It is a metric that measures the recurring revenue a company expects to earn in a year, and it is characteristic of businesses whose income arrives through subscriptions or other recurring payments.
Because it is an indicator of the company’s ability to generate revenues in a predictable way. Companies with a high ARR are more likely to be profitable and to grow in the future, which is why investors use it as a central valuation reference for recurring-revenue businesses.
Companies with a subscription-based or recurring-payment business model: SaaS companies, subscription service companies, media companies and telecommunications companies are the typical examples cited in the article.
Investors value some companies by ARR and others by EBITDA for different reasons: ARR is more relevant for companies with subscription or recurring-payment models, while EBITDA is the more relevant metric for companies with a traditional business model.
The article offers indicative ranges: 20-30x ARR for SaaS companies, 15-25x for subscription service companies, 10-15x for media enterprises and 5-10x for telecommunications companies. These are only a benchmark: the actual value of a company also depends on EBITDA, net income, revenue growth, profit margin and risk.
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