BIZCOMPS private-firm database gets beefed up

BVWireIssue #174-4
March 22, 2017

We’ve just added over 475 new private-company transactions to BIZCOMPS, bringing the total in the database to 13,160-plus. BIZCOMPS focuses on small-company transactions; the majority of transactions record less than $500,000 in gross revenue. Therefore, it’s a perfect resource for market comparables when your subject company is a “mom and pop” or sole proprietorship.

2016 data: As for the recent data additions, the average selling price for 2016 is $473,000. The average annual gross sales for transacted businesses in 2016 is $1.2 million. Companies with annual gross sales greater than $700,000 had a median sale price/annual gross sales multiple of 0.37; the harmonic mean multiple was 0.23. Firms of this size tended to have the lowest median and harmonic mean multiples than their smaller counterparts. For instance, companies with less than $300,000 in annual gross sales had a sale price/annual gross sales multiple of 0.51 (median) and 0.42 (harmonic mean).

Why use a harmonic mean instead of an arithmetic mean? As per the BIZCOMPS Frequently Asked Questions (FAQs), the harmonic mean is the preferable method for averaging multiples, such as the price-to-earnings ratio, in which price is in the numerator. If these ratios are averaged using an arithmetic mean (a common error), high data points are given greater weights than low data points. The harmonic mean, on the other hand, gives equal weight to each data point.

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