Is it a mistake to base my price entirely on what a friend sold their business for?

Generally, yes, unless that friend's business is genuinely comparable to yours in industry, size, financial performance, and risk profile, which is a narrower overlap than it might first appear. Even businesses that look similar from the outside can differ enormously in customer concentration, owner dependency, contract terms, and financial trends, all of which materially affect what a buyer will actually pay, and a friend's sale price reflects their specific deal, not a general market rate you can simply apply to yours.

The nuance is that a friend's experience can still be useful as one data point, particularly if they're willing to share real detail about how their deal was structured and why they landed on that number, rather than just the headline figure. What's risky is treating a single anecdote as if it were a reliable benchmark, especially since sale prices are rarely public and the full context behind any one number is easy to miss secondhand.

A proper valuation or a broker's read on your own specific business, informed by your actual financials, will serve you far better than anchoring on someone else's outcome. A business lawyer or accountant can help you understand what genuinely comparable evidence should look like before you rely on any single example.