Key Insight
In theory, valuations are based on comparable transactions. In practice, SMB transaction data is sparse, often self-reported, and rarely normalized. Use comps as a range indicator, not a precise benchmark.
What Comparable Transactions Show
Transaction comps provide:
- The multiple paid (purchase price ÷ SDE or EBITDA)
- Revenue and earnings size of the sold business
- Industry and business type
- Geographic market
- Sometimes: financing structure, earnout presence, deal structure
Where to Find SMB Transaction Data
BizBuySell Insight Reports: Aggregated data from closed transactions listed on the platform. Covers industry categories but limited deal-level detail.
IBBA / M&A Source reports: Broker association data, more detailed but access-limited.
Pratt's Stats / BIZCOMPS: Subscription databases with individual transaction records. More data, higher quality, expensive.
DealStats (Business Valuation Resources): Similar to Pratt's Stats; used primarily by business appraisers.
Your broker's experience: A broker who has closed 50 similar deals has direct comparable data. Ask them directly.
The Limitations of SMB Comps
Self-reported data: Brokers report transactions voluntarily; the data skews toward successful deals and may not capture distressed sales.
No normalization: Reported multiples are based on whatever SDE or EBITDA the broker submitted — without independent verification of add-backs. Two businesses reporting "4x SDE" may have been normalized very differently.
Sample size is small: In any specific industry and deal size range, there may be very few recent comparables.
Conditions change: A deal closed in 2021 (peak multiples, low rates) is not a valid comp for 2025 (higher rates, tighter credit).
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