The size premium (prime de taille) is an additional return demanded by investors in smaller companies to compensate for the elevated risks associated with small size — limited liquidity, lower diversification, key person dependency and more costly capital access. Empirically estimated from the historical excess returns of small-cap stocks over CAPM predictions, it is published annually by Duff & Phelps across market capitalisation deciles. For unlisted SMEs, it typically ranges from 1–4% depending on size. See our dedicated article and integration with WACC construction.

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Example: for a Swiss SME with CHF 12.0 million revenue, Hectelion retains a 2.5% size premium (Duff & Phelps reference for the corresponding size decile). Integrated into the WACC, it increases the cost of equity from 11.0% to 13.5% and the WACC from 9.2% to 11.1% — reducing the DCF enterprise value from CHF 22.0 million to CHF 18.5 million, a 16% impact attributable solely to the size adjustment.

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Hectelion calibrates and documents size premiums with market references in every SME valuation, providing justifications that meet Swiss FTA and French tax authority standards.