Private Market Valuation Comparables

Valuation comparables, commonly called "comps," are recently completed transactions used to establish a fair price for a business being sold. In M&A, a comp is a deal where a buyer agreed to pay a known price for a company with known financials, producing a verifiable multiple. That multiple, typically EV/EBITDA, becomes a benchmark for pricing similar businesses in similar sectors.

The underlying logic is straightforward: companies in the same industry, with similar size, margins, and growth profiles, tend to sell for similar multiples. If three comparable manufacturing businesses sold at 5x to 6x EBITDA over the past 18 months, that range becomes the starting point for pricing a fourth.

Think of it the way a homeowner thinks about real estate. Before listing a house, you look at what similar homes in your neighborhood sold for recently. You are not guessing at a price. You are anchoring it to evidence of what actual buyers actually paid. Valuation comparables work the same way, applied to businesses instead of properties. The comparables in Axial's tool are drawn from executed letters of intent on the Axial platform, deals between a willing buyer and a willing seller. These are verified data points from real private deals.

Comparables establish the range the market is paying for businesses like yours. Using them well involves three steps:

1. Identify relevant comps: Find transactions in your sector with similar revenue and EBITDA that recently closed. The more similar the company, same industry, similar size, comparable margins, the more reliable the benchmark. Use the sector and EBITDA filters in this tool to narrow to the most relevant transactions.
2. Identify the multiple range: From your comparable set, note the median EV/EBITDA multiple and the high and low ends. A sector trading at a median of 5.5x with a range of 4.5x to 7x tells you that business quality significantly moves the price within that band. Two businesses with similar EBITDA profiles can sell at very different prices depending on growth, customer concentration, and how dependent the business is on its owner.
3. Apply the multiple to your normalized EBITDA: Multiply your adjusted EBITDA, with owner compensation, one-time expenses, and non-recurring items removed, by the relevant multiple to get an estimated valuation range.

Comparables give you the market range. They tell you what buyers have been willing to pay for comparable businesses. What they cannot tell you is where your specific business lands within that range. That depends on your growth rate, recurring revenue, customer relationships, and how transferable the business is without you personally involved. A DCF valuation accounts for those specifics. The most defensible business valuation uses both: comparables to set the market benchmark and a DCF to test where your company's financials place you within it.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. For most privately held businesses, it is the closest approximation to what the business generates as a going concern, stripped of financing decisions, tax structures, and accounting treatments that vary from company to company.

Buyers use EBITDA as the foundation for valuation because it allows meaningful comparison across businesses with different capital structures, ownership histories, and depreciation schedules. A business financed primarily with debt will show different net income than an identical business with no debt, even if both generate the same operating cash flow. EBITDA removes those differences so buyers are comparing the same thing.

An EBITDA multiple is simply the price a buyer paid, expressed as a ratio to EBITDA. If a business generated $2M in EBITDA and sold for $10M, it sold at a 5x EBITDA multiple. That multiple is the unit of comparison in our tool. When you see a sector trading at 5x to 7x EBITDA, it means buyers have been paying between five and seven times annual EBITDA to acquire businesses in that sector.

One important caveat: the EBITDA used in a transaction is almost never the number straight off the financial statements. Buyers and sellers negotiate a normalized EBITDA that removes owner compensation above a market salary, one-time expenses, and non-recurring items. That adjusted figure is what the multiple gets applied to. An M&A advisor can help you calculate a defensible normalized EBITDA before you go to market.

Public company multiples, the EV/EBITDA ratios quoted for S&P 500 companies or large publicly traded industry peers, are not a reliable benchmark for valuing a small privately held business. The gap between public and private multiples is significant, consistent, and frequently misunderstood by owners who have read about valuations in the business press.

Three structural factors drive the difference:

1. Liquidity: Shares in a public company can be sold in seconds. Selling a private business takes 6 to 18 months and carries meaningful execution risk. Buyers discount for that.
2. Scale: Public companies are typically larger, more diversified, and have professional management teams that do not depend on a single owner to operate the business.
3. Information quality: Public companies file audited financials quarterly. Private companies often have limited reporting history and owner-adjusted expenses that require normalization before any multiple can be meaningfully applied.

The practical result is a large and persistent gap. Public company EBITDA multiples historically average 11x to 14x for S&P 500 companies. Smaller private businesses, those with $1M to $10M in EBITDA, typically transact at 4x to 8x depending on sector and company quality. Using a public market multiple to estimate what your business is worth will produce a number that is 30 to 50 percent too high.

Private market comparable transactions between private buyers and private sellers are the correct reference point. The data in this tool comes exclusively from this cohort, making it directly applicable to small private companies.

The market comparables in this tool are sourced from verified letters of intent executed between buyers and sellers on the Axial platform.

This matters because most private market valuation data is either self-reported, aggregated from third-party databases with incomplete information, or derived from public company trading multiples that do not reflect how private companies actually transact. Axial's data comes directly from deals on the platform, giving it a level of verifiability that most benchmarks lack.

The dataset covers transactions in the lower middle market, generally businesses with $5M to $100M in revenue and $1M to $10M in EBITDA, across more than 40 sectors and subsectors. All records are anonymized. The multiples shown reflect what buyers actually agreed to pay for businesses comparable to yours.

Using this tool to research valuation benchmarks on your own is a great starting point. For a more precise estimate, working with an experienced M&A advisor is recommended.

An advisor will not rely on a single methodology or a single data source. They will conduct a comparables analysis using their own proprietary transaction data accumulated from deals they have personally worked on, cross-referenced against market benchmarks like the ones in this tool. They will layer in additional valuation methodologies where relevant, including income-based approaches, to triangulate a defensible range rather than a single number. And they will calculate your normalized EBITDA correctly, identifying legitimate add-backs, removing one-time expenses, and adjusting owner compensation to a market rate. That adjusted figure is what a multiple gets applied to in a real transaction, and getting it right can move your estimated value meaningfully.

Beyond the valuation work, an advisor brings something a dataset cannot: direct relationships with active buyers. They know which acquirers are acquisitive in your sector right now, what those buyers are paying premiums for, and how your specific business compares to what has recently sold. When you are ready to go to market, that same advisor runs the process, managing outreach to qualified buyers, negotiating terms, and guiding you through diligence and close.

The right time to involve an advisor is earlier than most owners expect. If you are 12 to 24 months from a potential sale, a professional valuation conversation is worth having now. It gives you time to address the factors suppressing your multiple before buyers find them in diligence. Axial can help you find a vetted M&A advisor.