Business comparables can give you great insight into the market value of your business compared to your competition. Ideally, as an owner, you want to ensure your company is not undervalued when the time comes to exit the business. However, a buyer doesn’t want to pay an inflated price. To find a middle ground, comps are an excellent way to estimate the fair market value of your business. Looking at companies comparable to yours which have recently sold can help you determine the value of your business.
Comp information is available to professional analysts and brokers who have access to a subscription – sort of like a real estate agent with access to MLS. Alternatively, you can do your own research. For example, you can access many different business sale listing websites. In other words, you can easily do your research right from the comfort of your home. Look for businesses for sale which are similar to yours and study the listing data. However, it is advisable to check multiple websites to increase your data gathering to gain ample information. The more information you gather, the more accurately the comparable business price will be. The research will pay off in the long run.
The greatest challenge is finding current data for businesses similar to your own. For example, a bakery may sell sandwiches to workers that can also be classified as a bakery that sells cakes and sweets for special occasions. So you need to take this into account while searching for business comps. In addition, other factors such as location, seasonality, and business reputation are often unique to a particular business.