Facing the challenge of rolling out new BV methodology

BVWireIssue #145-4
October 21, 2014

The business valuation profession does not always welcome new methodology with open arms. In a recent interview with Business Valuation Update, Peter J. Butler (Valtrend) talked about the challenges of bringing new methodology into acceptance. Butler championed a more quantitative and empirical approach to developing the cost of capital, which is embodied in the Butler Pinkerton Calculator (BPC), a model that he invented and co-developed. The BPC passed a Daubert challenge in 2010.

Butler is now on the team that has developed the implied private company pricing line (IPCPL) and the implied private company pricing model (IPCPM), a calibrator for developing the cost of capital for small private companies. His experience with introducing the BPC is reflected in the way IPCPL/IPCPM is being rolled out.

Taking their time: “We are taking more time to allow the masses to become acquainted with it before we commercialize it, if that is in its future,” says Butler. “We have given out hundreds of free trials through our LinkedIn discussions. I should mention that the Butler Pinkerton Calculator is also available for a free trial run.”

Looking back, he says that some people may have misconstrued their enthusiasm for total beta (TB) and the BPC as an attack on the status quo. And of course, to a certain extent, it was. “Thus, we are being less ‘confrontational’ in rolling out IPCPM,” he says. “We call it a ‘Calibrator.’ It can run completely behind the scenes. As you can see, we are not asking the BV community to abandon the BUM, or whatever other publicly traded stock method they are using, such as MCAPM or TB/BPC for example. Rather, we are asking that they calibrate those indications of the appropriate cost of equity with the IPCPL/IPCPM. In summary, appraisers may feel less ‘threatened’ by its arrival than they might have with TB/BPC.”

The full interview with Butler is in the November issue of Business Valuation Update (subscription required). For more details on IPCPL/IPCPM, click here.

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