BVR has long been a supporter of the Pepperdine University Capital Markets Project, which conducts an annual survey of expected rates of return with respect to private companies. Respondents include lenders, private equity, venture capital firms, private-company owners, business brokers, business appraisers, and more. A BVWire poll found that 40% of respondents use this survey as part of their toolbox for estimating small-private-company cost of capital.

It’s useful: In the latest issue of Hardball With Hitchner, Jim Hitchner (Financial Valuation Advisors) takes a look at the 2021 report and concludes that the Pepperdine surveys are “indeed useful.” But he cautions users about using the information on a “standalone basis,” pointing out the small sample sizes and that some of the averages show a wide dispersion. Also, many of the businesses are very small, he notes.

In practice, valuers sometimes rely solely on the Pepperdine surveys for small-firm cost of capital. A case study of one such appraiser is in the March 2022 issue of Business Valuation Update.