What is a B2B SaaS platform worth?

A subscription software company looks simple to price from the outside: take the recurring revenue, apply a multiple, and stop. The harder question is how much of that revenue will still be there, and still growing, a year after the founder has stopped answering support tickets. This guide explains how that judgement is formed for a business-to-business subscription platform in Canada: what counts in the revenue, what gets discounted, how earnings are recast, and why two products with the same headline revenue can sell for very different amounts. It describes method, not numbers. Any multiple quoted in general industry discussion is illustrative, not a valuation of any particular business.

Retention tells a buyer more than headline revenue

Annual recurring revenue is a snapshot, and retention is the story behind it. Net revenue retention compares what the same group of customers pays now with what it paid a year earlier, after counting expansion, downgrades and cancellations. Gross logo churn counts only how many customers left, whatever their size. A platform can post strong net retention because a few large accounts keep adding seats while many small ones quietly leave, and a buyer who reads one measure alone can misjudge the business. A buyer can therefore ask for revenue by customer and by month, split into new, expanded, contracted and lost, and rebuild both measures itself. The glossary entries on ARR and MRR and customer churn give the standard definitions.

The contract paper behind the revenue

Two platforms with identical recurring revenue can carry very different risk depending on the paper underneath. A multi-year term with automatic renewal holds revenue in place; a month-to-month plan can end at the next invoice. Annual plans paid in advance mean the seller has already collected cash for service the next owner must deliver, which the parties can address through a working-capital adjustment or the price. Pricing shape matters as well: seat-based revenue can shrink when a customer cuts staff, while usage-based revenue rises and falls with the customer’s own volumes. A buyer reading the contracts can also look at termination rights, expiring discounts, and whether an assignment clause lets the agreement move to a new owner without the customer’s consent, because that bears on what the revenue is worth to anyone other than the current owner.

Clear title to the code is part of the price

A codebase is an asset only if the company owns it. Under the Copyright Act, an employer is first owner of a work made by an author employed under a contract of service or apprenticeship, in the course of that employment and in the absence of any agreement to the contrary, but that default is limited to such employment. An assignment of copyright is valid only if it is in writing and signed by the owner of the right or the owner’s duly authorized agent. Software written by a contractor, an early co-founder or a founder before the company existed can therefore sit outside the company’s title unless someone signed the paper. A buyer can price that gap or ask for it to be cured before closing. The answer on who owns code written by a contractor goes further into the mechanics.

Where the discounts come from

Five problems are worth looking for, because each bears on the risk a buyer takes on.

• Concentration: when a handful of accounts carry a large share of revenue, each renewal puts part of the revenue at risk, so a buyer can ask when every renewal falls. The glossary entry on customer concentration explains the idea.
• Founder dependence: one person acting as lead engineer, main seller and support desk means the business may not run without them. BDC notes that buyers may insist on a reduced price if the seller cuts all ties, and lists vendor financing, an earn-out, a phased transfer of ownership and an executive, board or advisory role as ways to stay involved.
• An undocumented codebase: software that only its author can build or release, or that leans on a contractor who has left, can cost the buyer time and carry unknowns.
• Churn hidden by annual terms: customers who have given notice but remain under contract for months keep recurring revenue high until the term ends.
• A compliance finding: an unreported privacy breach, or a data practice that does not match the published privacy policy, can raise questions about everything else the buyer has been told.

How earnings are recast

Reported profit can be adjusted before it is priced. An owner’s salary can be replaced with the cost of the roles the owner actually fills, because a founder paid little for doing three jobs flatters the margin. Capitalized development, one-off migrations and contractor spend can be examined for what will recur. SR&ED incentives deserve the same scrutiny: the CRA describes them as a deduction against income and an investment tax credit, claimed with the income tax return, and its guidance covers what happens when a claim needs a review. A buyer can therefore ask whether credits repeat, how well the supporting work is documented and what happens to them on a change of ownership, which the answer on SR&ED credits and a change of control addresses. The entry on add-backs covers the general technique.

Why two similar-looking platforms price differently

Picture two platforms with the same revenue, the same customer count and the same growth. One sells annual contracts to a spread of mid-sized firms, keeps documented code with signed assignments from everyone who wrote it, and has a second engineer who can release without the founder. The other depends on three large accounts on month-to-month terms and a founder who holds all the knowledge. The first gives a buyer more grounds to expect the revenue to continue; the second offers revenue that may have to be earned again. A strategic acquirer, a private equity roll-up and an individual searcher may also weigh the same facts differently.