cloudedjudgement.substack.com · 2024-09-20 · 622d

Clouded Judgement: Fed Rate Cuts and SaaS Valuation Implications

The Federal Reserve cut rates by 50 basis points, signaling a shift from inflation-fighting to balanced monetary policy, with expectations for approximately 1% in aggregate cuts through 2025. The article analyzes how this macroeconomic shift impacts SaaS company valuations, which are predominantly traded on revenue multiples, and provides comprehensive benchmarking data on median SaaS operating metrics and unit economics.

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Metrics in this report

10-Year Treasury Yield

3.72percent

current

As of September 19, 2024

CAC Payback Period

41months

median

Public SaaS companies

EV / NTM Revenue Multiple

5.4multiple

median

All public SaaS companies in dataset

EV / NTM Revenue Multiple

15.6multiple

median

Top 5 highest-valued SaaS companies by multiple

EV / NTM Revenue Multiple

9.6multiple

median

High-growth SaaS companies (>27% projected NTM growth)

EV / NTM Revenue Multiple

8.6multiple

median

Mid-growth SaaS companies (15%-27% NTM growth)

EV / NTM Revenue Multiple

4.0multiple

median

Low-growth SaaS companies (<15% NTM growth)

Federal Funds Rate Target Range

4.75-5.00percent

current

Post-50bps rate cut, September 2024

Free Cash Flow Margin

16percent

median

Public SaaS companies with positive FCF

General & Administrative Expense

17percent

median

Public SaaS companies as % of revenue

Gross Margin

75percent

median

Public SaaS companies

LTM Growth Rate

16percent

median

Public SaaS companies

NTM Growth Rate

12percent

median

Public SaaS companies

Net Revenue Retention

110percent

median

Public SaaS companies

Operating Margin

-9percent

median

Public SaaS companies

Research & Development Expense

24percent

median

Public SaaS companies as % of revenue

Sales & Marketing Expense

41percent

median

Public SaaS companies as % of revenue

Unemployment Rate

4.2percent

current

Current labor market