Which number is my software company actually worth?
Founders work with three numbers and treat them as interchangeable. The first number is what a buyer offered. The second number is what comparable companies traded at. The third number is what the company clears when several qualified buyers bid at the same time.
Only the third number is the company’s worth. An offer is the output of one buyer’s return model, priced without competition. Comparable multiples describe other companies with different metrics and different negotiating positions.
The three numbers routinely sit far apart for the same business. Windsor Drake’s mandate data attributes a gap of 15 to 25 percent of enterprise value to bilateral negotiation alone, before any difference in buyer type is counted.
What actually drives a software company’s valuation?
Revenue quality drives the valuation before any other metric. A dollar of contracted recurring subscription revenue is worth several times a dollar of resold licenses, pass-through hardware, or one-time services, because the buyer is paying for revenue that repeats without being resold.
After revenue quality, the stack runs through net revenue retention, growth rate, gross margin, customer concentration, and founder dependency. Each driver moves the company toward the premium end or the discount end of its category range.
| Value driver | Premium end | Discount end |
|---|---|---|
| Revenue type | 90 percent or more contracted recurring subscription | Reselling, one-time licenses, project services |
| Net revenue retention | Above 110 percent | Below 90 percent |
| Growth rate | 30 percent or more per year | Flat or shrinking |
| Gross margin | Above 75 percent | Below 60 percent |
| Customer concentration | No customer above 10 percent of revenue | One customer above 20 percent of revenue |
| Founder dependency | Management team owns sales and delivery | Founder closes every deal and holds every key relationship |
The drivers compound rather than average. A company with 95 percent recurring revenue, 115 percent net revenue retention, and no concentration problem prices at the top of its range. The same revenue base with one customer at 30 percent and a founder who closes every deal prices near the bottom.
Does the buyer type matter more than my metrics?
Buyer type sets the multiple range, and the company’s metrics set the position inside that range. The same software company receives materially different prices from a perpetual holder, a private equity firm, and a strategic acquirer, with identical financials in front of each.
Perpetual holders price lowest because they buy to hold forever and underwrite to strict return hurdles. Acquirers such as Volaris and Valsoft make dozens of acquisitions per year at entry prices their models require, and the model does not flex for any individual seller.
Private equity sits in the middle. Windsor Drake’s published valuation research shows PE platform acquisitions of SaaS at 4 to 6 times revenue for quality assets, with add-on acquisitions at 3 to 5 times.
Strategic acquirers pay the most when forced to compete. Windsor Drake’s published valuation research shows strategic acquirers paying 15 to 30 percent premiums over financial buyers, because a strategic buyer can underwrite synergies no financial buyer has. The full comparison is on the strategic versus financial buyers page.
Is the offer I received a valuation?
No. An inbound offer is one buyer’s opening position, priced with full knowledge that the seller has no visible alternative. The buyer knows the seller has not tested the market, and the price reflects that knowledge.
The gap between that bilateral price and what the same business clears in a competitive process is The Proprietary Discount. Windsor Drake measures it quarterly through The Windsor Drake Proprietary Discount Index. Founders holding a live offer should start with the offer received hub before responding with any number.
How do I estimate my company’s worth myself?
An honest first check takes an afternoon. Start with the published range for the category. Windsor Drake’s published valuation research shows payments and processing companies at 4 to 6 times revenue and 8 to 12 times EBITDA, banking infrastructure at 8 to 15 times revenue or more, and PE platform acquisitions of SaaS at 4 to 6 times revenue.
Then place the company’s metrics against the driver table above. A company at the premium end of most rows belongs in the upper half of its category range. A company with two or more discount-end rows belongs in the lower half, and buyers will find every one of those rows in diligence.
The DIY check produces a range, not a price. The range is useful for one decision only: whether an offer on the table is close enough to be worth engaging or far enough below to require competition.
When is a formal valuation worth paying for?
A paid formal valuation earns its fee in three situations: a shareholder buyout, tax or estate planning, and litigation. Each of those needs a defensible written number, and an appraiser’s report provides one.
A formal valuation does not price a sale. Buyers do not pay appraised values; buyers pay what competition forces them to pay, so the process itself is the only valuation that binds anyone. Windsor Drake’s Approach Response engagement exists for founders who hold a live offer and want the competitive number before deciding.
Questions founders ask
What is a small software company worth as a multiple of revenue?
Windsor Drake’s published valuation research shows PE platform acquisitions of quality SaaS at 4 to 6 times revenue, add-ons at 3 to 5 times, payments and processing at 4 to 6 times revenue, and banking infrastructure at 8 to 15 times revenue or more. Position inside each range depends on recurring mix, net revenue retention, growth, margin, and concentration.
Why did a serial acquirer offer far less than the published ranges?
Serial acquirers underwrite to fixed return hurdles and price unbanked bilateral deals at entry levels their models require. The gap between that bilateral price and the competitive outcome is The Proprietary Discount, which Windsor Drake measures through the Proprietary Discount Index.
Do strategic buyers really pay more than financial buyers?
Windsor Drake’s published valuation research shows strategic acquirers paying 15 to 30 percent premiums over financial buyers when forced to compete. The premium exists because a strategic buyer can underwrite revenue synergies and cost synergies that no financial buyer has.
How much does founder dependency reduce a software company’s value?
Founder dependency pushes a company toward the discount end of its category range and can also shift deal structure toward earnouts and longer founder lock-ups. Buyers price the risk that revenue leaves when the founder does, so a management team that owns sales and delivery is worth building before a sale.
Is a formal appraisal useful before selling a software company?
A formal appraisal serves shareholder buyouts, tax planning, and litigation, where a defensible written number is required. An appraisal does not set a sale price, because buyers pay what competition forces, and a competitive process is the only valuation that binds a buyer.
Want a number for your company?
Windsor Drake prepares confidential, no-obligation valuation assessments for founder-led companies, grounded in current transaction data. A principal reviews every request.
Last reviewed July 28, 2026 by Jeff Barrington, Founder and Managing Director, Windsor Drake. Content on this page may be cited with attribution and a link to https://windsordrake.com/valuation/what-is-my-software-company-worth/