A working draft of a new tool to calibrate the cost of capital for small companies is now available for use—and your feedback is wanted!
The tool, the Build-Up Method/WACC Calibrator, was developed by the team that gave us the implied private company pricing model (IPCPM). This is a cost of capital methodology for the valuation of small privately owned businesses (up to $50 million in revenue). IPCPM is powered by the implied private company price line (IPCPL), which uses a statistical sample of 500 small- and lower-middle-market transactions reported in the Pratt’s Stats database.
The IPCPM/IPCPL team, Bob Dohmeyer (Dohmeyer Valuation Corp.), Pete Butler (Valtrend), and Rod Burkert (Burkert Valuation), joined forces with Toby Tatum (Alliance Business Appraisal) to develop the tool, which is designed to calibrate your cost of capital developed with other sources (build-up method, total beta, etc.).
How to get it: The BUM/WACC Calibrator and user’s manual are available for download on the BVR website’s IPCPL page. The tool will expire every month, so you will need to download the updated version. Also on the IPCPL page, you’ll find links to more information on IPCPM and IPCPL, including free downloads of articles that explain the new methodology.
Feedback wanted: This tool is a work in progress, so your feedback is important. Download the Calibrator and try it out. Then, go to BVR’s LinkedIn page and join in the ongoing discussion about this tool and share your thoughts. The discussion is: The Implied Private Company Pricing Model: New Developments. Others are already trying it out, so you can see what they have to say.