ARR Multiple
Definition
A valuation multiple calculated as enterprise value divided by annual recurring revenue. The ARR multiple is the primary multiple applied to Recurring Revenue companies and is more informative than a revenue multiple for businesses with a mix of recurring and non-recurring revenue because it isolates the predictable, contractually committed portion of the revenue base.
Common Misapplication
The most common misapplication is applying ARR multiples derived from public market comparables to private companies without applying a liquidity discount. Public company ARR multiples reflect the liquidity premium of publicly traded equity. Private company equity is less liquid and commands a lower multiple, all else being equal.
FFI Standard Reference
This term is defined and applied in Book 4, Section 4.3: Comparable Company Analysis.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: ARR Multiple. https://ffistandard.org/glossary/arr-multiple/. 2026.