What this is
ARR multiple valuation is fast but fragile: enterprise value is roughly ARR * multiple, and both inputs can change meaningfully. A small sensitivity grid makes the uncertainty explicit.
How to choose ranges
- ARR range: use realistic forecast error or pipeline volatility (for example +/- 10-20%).
- Multiple range: use a market band from comparable companies (for example +/- 1-2 turns).
- Use the same ARR definition across scenarios (exclude one-time items).
How to read the grid
- Rows/columns show how valuation responds to ARR vs multiple moves.
- If multiple sensitivity dominates, valuation is mostly market-driven (quality signals matter).
- If ARR sensitivity dominates, execution (growth, retention, pricing) matters most in the near term.
What to include in scenarios
- Base, downside, and upside ARR cases tied to pipeline or renewal risk.
- Multiple bands that reflect market conditions and growth quality.
- Net debt or cash adjustments to translate EV to equity value.
Sensitivity QA checklist
- Use the same ARR definition across scenarios.
- Document the source of the multiple range (comps, recent rounds).
- Avoid mixing calendar-year ARR with trailing-twelve-month revenue.
Common mistakes
- Using a single multiple with false precision.
- Mixing ARR definitions across periods (inconsistent run-rate).
- Ignoring retention and margin (multiples reflect quality).