Comparable transactions
Comparable transactions — often called ’comps’ — are recent sales of similar businesses, used as a reference point when pricing a business for sale. Analysts look at deals in the same industry, of similar size, and in a similar geography, then compare the multiples those deals sold at to gauge where a current listing might land.
No two businesses are identical, so comparable transactions are a starting range, not a formula. The method looks at what similar businesses actually sold for — usually expressed as a multiple of revenue or earnings — and uses that range to sanity-check a proposed asking price.
What makes a transaction genuinely comparable
- Same or closely related industry, and a similar business model
- Similar revenue or earnings size — a small local operation and a much larger regional company rarely compare well as pricing references
- Similar geography, since local demand and buyer pools differ
- A recent sale date, since market conditions shift over time
Limits of the method
Private business sale prices are rarely published in full detail, so most comparable-transaction data comes from aggregated industry databases rather than a complete, verifiable record. Two ’comparable’ businesses can still differ a lot in customer concentration, owner dependence, or growth trend — factors that move the real price well outside the raw comp range.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Treadstone LawLegal commentaryGetting a Business Valuation Before You List
- 02Treadstone LawLegal commentaryHow Much Is a Small Business Worth? Valuation Basics for Ontario Buyers
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