Transaction databases are integral to the market approach in business valuation, providing empirical data on private company sales. This article examines three leading databases—BIZCOMPS, ValuSource Market Comps, and DealStats—highlighting their advantages, limitations, and implications for valuation accuracy. The report integrates commentary and research from valuation professionals and third-party sources to offer a well-rounded perspective.

1. Introduction

The market approach to business valuation relies on comparable transaction data to derive valuation multiples. Databases such as BIZCOMPS, ValuSource Market Comps, and DealStats (formerly Pratt’s Stats) provide these data. While indispensable in some contexts, these databases have inherent limitations. This article presents an in-depth analysis of their strengths and weaknesses, supported by professional commentary.

2. BIZCOMPS

Advantages:

• Focus on Small Businesses: Specializes in “main street” businesses (e.g., retail, restaurants), making it ideal for valuing similarly sized entities.
• Asset Sale Data: Limits entries to asset sales, simplifying comparability.
• Standardized Financial Metrics: Includes revenue, seller’s discretionary earnings (SDE), and sale price.

Limitations:

• Excludes Stock Sales: Omits valuable data from transactions involving equity.
• Geographic and Sector Biases: Sales are often concentrated in specific industries (e.g., hospitality) and regions (e.g., U.S. West Coast).
• Outdated Transactions: While updated annually, some transactions from the 1990s remain, which may not reflect current market conditions.
• Sparse Transaction Detail: Omits key variables such as deal structure, financing, and buyer/seller motivations.

Professional Insight: BIZCOMPS cautions against combining its data with other databases due to definitional inconsistencies (e.g., SDE calculations).

3. ValuSource Market Comps

Advantages:

• Extensive Dataset: Covers over 49,000 comparables across 800+ industries as of Q1 2025.
• Analytical Tools: Offers built-in filters, regressions, and valuation calculators.
• Frequent Updates: Updated quarterly for relatively current data.

Limitations:

• Data Inconsistency: Aggregated from varied sources (e.g., business brokers, industry reports), leading to inconsistencies in reporting standards.
• Redundancy Risk: Overlap with BIZCOMPS and DealStats may occur due to shared data sources (e.g., broker submissions), potentially inflating sample sizes or skewing multiples if not carefully filtered.
• Costly Access: Requires a premium subscription, typically pricier than BIZCOMPS but comparable to DealStats.

Professional Insight: The lack of transaction context may limit reliability.

4. DealStats (Formerly Pratt’s Stats)

Advantages:

• Comprehensive Detail: Includes up to three years of financials (e.g., revenue, net income, select balance sheet items), roles of buyers/sellers, and deal structure.
• Diverse Transaction Types: Includes both asset and stock sales.
• Larger Transaction Sizes: Appropriate for mid-sized companies (e.g., $1M–$50M in revenue).

Limitations:

• Complex Interpretation: Requires significant judgment due to varied deal structures (e.g., earn-outs, seller financing).
• Data Lag: Time delays between transaction and reporting (often 6–12 months).
• Subscription Cost: One of the more expensive tools, similar to ValuSource but costlier than BIZCOMPS.

Professional Insight: DealStats is valuable for advanced valuations but requires thorough due diligence to account for deal-specific nuances.

5. Common Challenges Across All Databases

• Geographic Relevance: Regional pricing differences (e.g., urban vs. rural markets) make broad comparisons questionable. For SBA 7(a) loans, these disparities can complicate valuations, as local market conditions heavily influence small business pricing.
• Statistical Reliability: R-squared values in regressions are often low (e.g., below 0.5), indicating that transaction multiples may not reliably predict a subject company’s value, requiring significant appraiser judgment.
• Income vs. Market Disparity: Valuations based on transaction multiples often diverge significantly from income-based methods (e.g., capitalization of earnings), necessitating reconciliation.
• Opaque Deal Terms: Critical terms such as financing structure, earn-outs, and buyer motivations are usually not disclosed, limiting comparability.
• Mixed-Source Risk: Combining data from different platforms risks inconsistency due to differing definitions (e.g., SDE in BIZCOMPS vs. EBITDA in DealStats) and data collection methods, which can distort valuation multiples.

6. Conclusion

BIZCOMPS, ValuSource Market Comps, and DealStats are essential tools for business appraisers, but each has intrinsic limitations. A nuanced application is critical. Geographic and temporal context, statistical rigor, and reconciliation with income-based methods are necessary to ensure defensible valuations.  Rather than relying solely on transaction data, appraisers should use the value implied using the market approach to support the value implied by the income approach to enhance accuracy and credibility.