Our business is too small for guideline public company multiples but too large for main street broker valuations. How do we use private transaction databases and capitalized earnings methods to set a realistic valuation?

Question

Tyler Smith · Accepted Answer

When you sit in the lower mid-market, finding reliable valuation benchmarks is difficult. You cannot rely on public stock multiples, nor should you look at local business broker listings. To set a realistic but aggressive target valuation, you must use private transaction databases like Pratt's Stats or DealStats. These platforms provide actual transaction data for closed private deals of similar size and industry. When analyzing this data, do not just look at average multiples. Focus on the quartile distribution. Look at what the top twenty-five percent of businesses in your industry sold for and identify the operational characteristics that put them there. Use a capitalization of earnings method with a carefully calculated discount rate that reflects your actual risk profile. Show how your operational consistency, driven by your weekly Scorecard and clear Accountability Chart, lowers this discount rate compared to your peers. Present this valuation analysis to your investment banker as your baseline. By anchoring your price expectations in real, private-market transaction data rather than theoretical public models or main street assumptions, you maintain control of the narrative. You show buyers that you understand your worth and have the data-driven operational metrics to back it up.