How are market comparable multiples calculated in major SMB databases, and how should they be used to calibrate intrinsic valuations?

The Methodology: When databases like PeerComps, DealStats, and BIZCOMPS record a market comparable transaction, the financial inputs (Revenue, EBITDA, and SDE) are based on a 1-year snapshot. According to the data collection standards of Business Valuation Resources (BVR) and guidelines from the American Society of Appraisers (ASA), these inputs specifically reflect the most recent full fiscal year or the Trailing Twelve Months (TTM) prior to the sale. They do not use multi-year historical averages to baseline the deal. When pulling benchmarks from these databases, you must rely on the median or harmonic mean to prevent high outliers from distorting your data.

The Verification Risks: Relying purely on this data without understanding its flaws will lead to massive valuation errors. Because market comparable transactions in the SMB space are private, there is no SEC-style regulation enforcing data accuracy. With the exception of PeerComps, which mandates SBA bank verification backed by IRS transcripts, databases rely heavily on voluntary submissions from business brokers. This lack of verification creates inconsistencies in how earnings are normalized and hides critical deal structures, making the resulting market comparable multiple dangerously misleading if taken at face value.

The Calibration Strategy: Because of these data risks, valuation experts rarely rely on a market comparable valuation alone. Instead, a bottom-up intrinsic valuation method (such as a Discounted Cash Flow or Capitalization of Earnings) is expected to provide a more fundamentally sound baseline based on the company's actual cash-generating ability. The market comparable data is then used as a critical reality check to calibrate the intrinsic model, ensuring the mathematical value actually aligns with what a real-world buyer is willing to pay.