The global SaaS market was worth an estimated $315.68 billion in 2025 and is projected to grow to $1.48 trillion by 2034, expanding at roughly 18.7% a year. If you have ever wondered exactly what a SaaS company is, how the SaaS business model actually makes money, or how a SaaS business gets valued when it is sold, this guide covers all three.
Originally published April 18, 2024. Updated September 20, 2026 with 2026 market data and expanded coverage.
What Is a SaaS Company?
A SaaS company (Software as a Service) is a business that delivers its software to customers over the internet instead of requiring them to install and run it on their own computers or servers. Customers log in through a web browser or app, and the SaaS company hosts the application, stores the data, and pushes out updates centrally — typically for a recurring subscription fee rather than a one-time purchase.
This is different from a traditional software vendor that sells a perpetual license and leaves installation, hosting, and maintenance to the customer. A SaaS business keeps the relationship — and the revenue — going for as long as the customer keeps paying, which is one reason SaaS companies tend to be valued differently than traditional software businesses when they are bought or sold.
How the SaaS Business Model Works
The SaaS business model is built around recurring revenue: customers pay on a subscription basis (usually monthly or annually) to access the software for as long as they need it. In exchange, the SaaS provider is responsible for hosting, security, uptime, and ongoing product updates, so customers always have the latest version without a separate upgrade project.
SaaS vs. Traditional Software vs. PaaS and IaaS
SaaS is one of three common cloud delivery models, and the differences matter if you are trying to classify your own company:
| Model | How It’s Delivered | Who Maintains It | Typical Example |
|---|---|---|---|
| SaaS (Software as a Service) | Full application, accessed in a browser | The vendor | Salesforce, HubSpot, Zendesk |
| Traditional / On-Premise Software | Installed on the customer’s own hardware | The customer | Legacy on-site ERP systems |
| PaaS (Platform as a Service) | A cloud platform for building apps | Vendor manages the platform; customer manages the app | Google App Engine, Heroku |
| IaaS (Infrastructure as a Service) | Raw cloud servers, storage, and networking | Customer manages the OS and everything above it | Amazon EC2, Microsoft Azure VMs |
Types of SaaS Business Models
Not all SaaS companies charge the same way. Here are the pricing models you will see most often:
- Flat-rate subscription — one price, one set of features, billed monthly or annually.
- Tiered / per-user pricing — a Basic, Pro, and Enterprise tier, often priced per seat, so cost scales with team size.
- Usage-based (metered) pricing — customers pay based on how much they use the product, such as API calls or data processed.
- Freemium — a free tier with core functionality, with paid upgrades for advanced features or higher limits.
- Per-feature / add-on pricing — a base subscription plus optional paid modules for specific needs.
B2B SaaS vs. B2C SaaS Companies
A B2B SaaS company sells to other businesses — think CRM, project management, or HR software — and typically has fewer, higher-value customers with longer sales cycles. A B2C SaaS company sells directly to individual consumers, usually at a lower price point with a much larger customer base and a self-serve signup process. Some SaaS businesses serve both markets with different pricing tiers for individuals and teams.
Real-World Examples of SaaS Companies
Some of the most recognizable SaaS companies include:
- Salesforce — cloud-based CRM, one of the companies most often cited as the definition of enterprise SaaS.
- HubSpot — marketing, sales, and customer service software sold on a subscription basis.
- Zendesk — a cloud platform for managing customer support tickets and inquiries.
- Shopify — a subscription platform that lets merchants run an online store without hosting their own infrastructure.
- Slack — team communication software billed per active user.
Large technology companies often blur the line: Microsoft and Adobe, for example, sell SaaS products (Microsoft 365, Adobe Creative Cloud) alongside other business lines, so whether a specific company counts as “a SaaS company” often depends on which product line you mean.
How Big Is the SaaS Market in 2026?
According to Fortune Business Insights, the global SaaS market was valued at $315.68 billion in 2025 and is projected to reach $1.48 trillion by 2034, a compound annual growth rate of about 18.7%. That growth is one reason acquirers continue to pay a premium for well-run, recurring-revenue SaaS businesses.
How SaaS Companies Are Valued When You Sell
Because SaaS revenue is recurring, buyers usually value SaaS companies using a multiple of annual recurring revenue (ARR) or monthly recurring revenue (MRR) rather than relying solely on traditional EBITDA multiples — though a profitable SaaS business will often be evaluated on both. The multiple a buyer is willing to pay is shaped by factors such as:
- Net revenue retention and churn — how much existing customers keep spending (or leave) year over year.
- Gross margin — how much it costs to host and support each additional customer.
- Growth rate — how quickly ARR is expanding.
- Customer concentration — whether revenue depends on a handful of large accounts or is broadly diversified.
- Founder/owner dependency — how well the business runs without the current owner in the day-to-day.
If you are planning to sell a SaaS business, working with business brokers who understand SaaS metrics can make a meaningful difference in the final price, since general business brokers do not always know how to present ARR, churn, and retention in a way that supports a premium multiple. This applies just as much to specialized software categories like cybersecurity SaaS, where buyers scrutinize retention and compliance even more closely.
ValleyBiggs works with business brokers specializing in tech companies to help SaaS founders maximize value at exit, from positioning ARR and retention correctly to running a competitive buyer process. If you are exploring a sale, get in touch for a confidential conversation about your company’s valuation.
FAQs
1. What does SaaS stand for?
SaaS stands for Software as a Service. It describes software that is hosted by the provider and accessed by customers over the internet, usually through a web browser, rather than installed on the customer’s own computers.
2. What is the difference between SaaS, PaaS, and IaaS?
SaaS delivers a finished application customers use directly (like Salesforce). PaaS gives developers a platform to build their own applications on top of (like Google App Engine). IaaS provides raw computing infrastructure — servers, storage, networking — that customers configure themselves (like Amazon EC2).
3. Is Salesforce a SaaS company?
Yes. Salesforce is one of the most widely cited examples of a SaaS company: its CRM platform is hosted entirely in the cloud and sold on a subscription basis, with no software for customers to install or maintain.
4. What are examples of SaaS companies?
Common examples include Salesforce (CRM), HubSpot (marketing and sales), Zendesk (customer support), Shopify (e-commerce), and Slack (team communication). Many larger technology companies, including Microsoft and Adobe, also sell specific SaaS product lines alongside other business lines.
5. What are the main SaaS business models?
The most common SaaS pricing models are flat-rate subscription, tiered or per-user pricing, usage-based (metered) pricing, freemium, and per-feature add-on pricing. Many SaaS companies combine more than one, such as a tiered plan with usage-based overages.
6. Is my B2B software business considered a SaaS company?
If your business sells cloud-hosted software to other companies on a subscription basis and you handle hosting, updates, and support centrally, it fits the standard definition of a B2B SaaS company, regardless of company size.
7. How are SaaS companies valued when they are sold?
SaaS companies are typically valued as a multiple of annual recurring revenue (ARR), adjusted for growth rate, net revenue retention, gross margin, and how dependent the business is on the current owner. Profitable SaaS businesses may also be evaluated on EBITDA.
8. What is the difference between a SaaS company and a traditional software company?
A SaaS company hosts its software centrally and sells access on a subscription basis, while a traditional software company sells a license for software the customer installs and maintains on their own systems, usually as a one-time purchase.