Frequently Asked Questions
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Chartered Business Valuators serving the GTA including Toronto, Mississauga, Oakville, Burlington, Hamilton & southern Ontario.
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What is a Chartered Business Valuator (CBV)?
Chartered Business Valuators (CBVs) are professionals who quantify the value of all, or part, of a business or its securities. CBVs can also calculate the value of tangible or intangible assets (such as goodwill, brands, intellectual property, trademarks and so on). A CBV can also be retained to calculate economic losses or damages (often for litigation purposes) and also to produce various income calculations for family law purposes. The CBV then must explain their analysis and conclusion in a manner that the user of the information will understand.
The Canadian Institute of Chartered Business Valuators (CBV Institute) is recognized as the leading business valuation professional organization in Canada. It is recognized by the courts and by the Canada Revenue Agency (CRA). The process of receiving a CBV designation generally takes approximately 3 years. A Chartered Business Valuator receives the CBV designation after completing intense mandatory and elective courses, obtaining extensive practical valuation experience, and passing the rigorous Membership Qualification Examination (MQE).
Why is a business valuation report needed?
Business valuations and economic loss reports are prepared for a variety of reasons, including:
- Corporate reorganizations
- Divorce (we can also produce guideline income reports for child/spousal support purposes)
- Purchase or sale of a business
- Commercial litigation
- Estate freezes
- Shareholder agreements
- Employee share ownership plans (ESOPs)
- Shareholder disputes, including shareholder oppression situations
- Expropriations
- Business interruption claims
- Succession
- Management buyout / shareholder buyout
- We can also prepare expert reports to quantify economic loss, damages for litigation support purposes
How long does it take to complete a valuation?
Generally, once all of the information has been received it should take a few weeks to complete the final report.
Do you also value real estate or equipment?
No. However, we do work closely with experts in real estate and equipment appraisal, as is required.
Can a "rule of thumb" be used to value a business?
No. In some instances there may exist rules of thumb for an industry but, at the most, they should only be used as a secondary test of value. There is a risk of relying on a rule of thumb that it is not applied correctly, that is incorrect, outdated or too general to rely on. Some people outside of the valuation profession tend to rely too heavily on rules of thumb and this often results in valuations that are materially different than what a detailed analysis would offer.
What is fair market value?
According to the Canadian Institute of Chartered Business Valuators, it is defined as:
"The highest price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms-length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts."
What will a business valuation report cost?
The cost for a valuation report is unique to the business and situation. However, for most assignments, we work on an hourly or per diem basis. We should be able to provide you with a general understanding of what the total cost should be prior to beginning the engagement. To provide you some very high level guidance on fees, the order of magnitude for the total cost of a written valuation report is generally a few thousand dollars and not a few hundred dollars. Please contact us to discuss your needs.
What information is included in your final report?
The reports that we prepare adhere to the professional practice standards set by the Canadian Institute of Chartered Business Valuators (CBV Institute).
There are three types of Valuation Reports: Comprehensive, Estimate and Calculation. These reports differ by the scope of review, the amount of disclosure included in the report, and the level of assurance provided in the conclusion, with a comprehensive report providing the highest level of assurance, an estimate report providing a mid-level of assurance, and a calculation report providing the lowest level of assurance. The type of report required will differ based on your particular need. For instance, a litigation matter may require a comprehensive report.
Can my Chartered Accountant or CPA value my business?
Maybe. We have the utmost respect for the accounting profession; however, relatively few accountants possess the expertise and additional professional credentials (such as the CBV designation) to formally value a business. In fact, most accountants will not value their clients' businesses even if they are qualified to do so because there is usually an inherent conflict of interest that should be avoided if they are to provide an independent opinion of value. For clarity, an accounting designation on its own does not offer sufficient expertise in business valuation matters. An accountant's role and expertise is quite different to that of a Chartered Business Valuator. Typically, accountants will ask us to value their client's business and we would work closely with them throughout the process.