One of BVR’s customers called with what appeared to be a pretty straightforward question last week: “How do I best benchmark my subject company’s operating margins compared to their industry?” As with all questions in business valuation, there are many answers…
Obviously, there are the industry surveys (the October issue of Business Valuation Update has a feature on BizMiner; the November issue will have a review of improvements to RMA). But, there are other great sources of private company operating margins. In addition, operating margins are in Pratt’s Stats for private companies that have sold 100% of their interest (here’s a link to a sample—see the ‘operating profit margin’ at the bottom of the report). Public Stats also includes this information for public companies that have sold 100% of their interest: here’s that sample.
“BizMiner will also satisfy your request. You’ll see from this sample that the operating margins for operating private companies (versus sold private companies) are included on page two of the report; look for ‘operating income’ and the margin is shown. Like Pratt’s Stats, this report compiles aggregate data rather than details from individual transactions.
Lastly, the Mergerstat/BVR Control Premium Study also contains operating profit margins on public operating companies transferred at a control level (typically 100%). Here’s a sample.”
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