Rob Walling

It's just how narrow do you want the part of the bell curve to be?

You know, how directed do you want it to be?

And so I can say 5 to 10 or 4 to 8, but it is somewhere in there.

The thing is, is acquirers in that range tend to be strategics or they tend to be private equity.

And what they really care about is growth.

The top three things they look at are growth, growth, and growth.

And then churn is the next one.

And the absolute revenue amount, like if it's $2 million versus $5 million versus $10 million also matters.

And Anar Volset can come on here, and he's done a whole talk on this topic that's really good.

But growth...

is what matters, and that's what will drive growth and churn, and that's what will drive that ARR multiple up.

So your question of all else being equal, is a company with higher ARR but lower free cash flow really worth more than a company with lower ARR but stronger free cash flow?

The answer is, yeah.

It can be, for sure.

Because think of it, free cash flow is a short-term thing.

Free cash flow is now.

I want to take out cash out of the business now.

And if I'm buying a $2 or $3 million business, ARR, SaaS company, that has 10% net negative churn, and I'm going to pump...

millions of dollars into growth and I can then grow this thing to 10 or $20 million ARR and I can sell it for a four to eight X multiple.

Let's say I get it to 20 million.