Know the Market: How Industry Comparables Shape Business Valuation

When it’s time to consider a sale, many founders wonder what their company is worth. One of the clearest signals comes from outside: how much are similar businesses selling for? This article breaks down how competitor sales, industry comparables, and performance benchmarks can influence your valuation. It also explores the specific metrics buyers care about—like margins, customer retention, and concentration risk—and how they compare you to others in your space.

What Are Comparable Sales?

Comparable sales, often called “comps,” refer to past transactions involving companies similar to yours. These could be direct competitors or businesses in your industry that have recently sold.

If one of those businesses sold at a certain EBITDA multiple—say, 7x—your business will likely land in a similar range. Most deals don’t vary more than one full turn of EBITDA unless something significant stands out.

Key Factors That Influence Where You Fall

Even if your business is in the same space, here’s what could push your valuation higher or lower than the comp:

• Growth rate

  Are you growing faster than the comp? That might earn you a premium.

• Customer concentration

  If one customer drives most of your revenue, buyers will see risk. Diversification helps.

• Margins

  Stronger margins than the comp? That’s a plus.

• Recurring revenue

  In software or subscription businesses, higher net revenue retention (NRR) means more predictable cash flow. Buyers pay for predictability.

• Churn

  Lower churn = higher value. It signals stickier customers and better lifetime value.

Industry Rankings and Reports

Sometimes consulting firms rank companies side-by-side based on market data. If you’re near the top, that’s strong positioning for your pitch deck. But most founders won’t have access to those reports. Instead, lean on what you know:

• Who you beat in deals

• Where you win and why

• Any public data you can reference

Use Comparables, But Be Realistic

Buyers see dozens of deals each year. They know the market. Don’t claim you’re worth more unless you can show why. But if you consistently outperform a peer that sold for a good multiple, that story matters.

Confidence Helps—If It’s Grounded in Reality

Valuation is about numbers, but confidence plays a role. If you’re proud of your company and believe in its future, buyers will pick up on that. It won’t change the multiple overnight, but it will help build trust.