Business Valuation Report (CBV Reports)

A business valuation report sets out a valuator's conclusion on the value of a defined business interest as of a stated valuation date. The interest might be all the shares of a corporation, a 30% block of common shares, or the operating assets of one division. The report explains what was valued, the standard of value used, the approach and method, the information relied on and the limits on the conclusion.

In Canada, the reference standards come from the CBV Institute, which grants the Chartered Business Valuator (CBV) designation. Its Practice Standard No. 100 treats any written communication containing a valuation conclusion, prepared by a valuator acting independently and objectively, as a valuation report, whether it is a bound report, an email or a set of schedules. Revised standards apply to independent valuation engagements that began on or after January 1, 2026. The Institute also accepts the International Valuation Standards (IVS) as an alternative, and a report prepared under IVS must say so.

A report under the CBV Institute standards must disclose who engaged the valuator and who may rely on the report, its purpose and intended use, and its level of conclusion. It must state that the valuator acted independently and that the fee does not depend on any outcome. It must also define its basis of value, which for most tax and transaction work is fair market value. Use of the report is restricted to the named users and the stated purpose.

Independence changes the product. A CBV who advises one side of a negotiation without acting independently issues an advisory report under separate standards, and a valuator giving evidence in litigation follows the CBV expert report standards as well as the court's rules.

CBV Institute standards recognize three levels of valuation conclusion. All three require review, inquiry, analysis and independent corroboration of significant information. They differ in depth, and the level must be communicated to the client in writing, usually in the engagement letter.

The last column is a guide, not a rule. The CBV Institute's guidance on choosing a level points to the extent of reliance, the significance of the matter to the user, the number of users, whether the report will be public and whether the matter is or could become contentious. It notes that where a market of buyers has been canvassed and price will be set by negotiation or auction, a lower level may be suitable, while a price or settlement based only on the valuation calls for more work. A shareholder agreement can also prescribe the level.

Cost and timing rise with each level. The sensible choice is the lowest level that will hold up for the actual use.

The level describes how much work supports the conclusion, not which method is used. Our guide to selling your business in Canada outlines the common methods: earnings multiples, discounted cash flow, asset-based approaches and comparable transactions.

A business broker often gives a free or low-cost opinion of value when competing for a listing. It is usually a multiple applied to seller's discretionary earnings and is designed to set an asking price that will attract buyers. That is a legitimate marketing tool, but it is a different product:

• Independence: a broker is usually paid a commission when a deal closes; a CBV report must state that the valuator's fee is not contingent on any result.
• Standards: a broker opinion is not prepared under the CBV Institute's disclosure, scope of work and file documentation standards.
• Standard of value: a broker estimates a likely sale price to the buyers in the market; a CBV report states and defines its basis of value, often fair market value.
• Use: a broker opinion helps an owner decide whether and how to list. It is not designed to serve as evidence of value for the CRA, a court or a co-shareholder who disputes the number.

Online tools sit a step lower again. Lamba Law's free business valuation calculator gives a directional range for planning, not a valuation conclusion.

• Shareholder buyouts: buy-sell clauses often name a CBV, a standard of value, a valuation date and whether minority discounts apply. Our guide to shareholder buyout valuation in Ontario covers what to prepare.
• Estate freezes and rollovers: the fixed-value freeze shares must be worth the fair market value of the shares exchanged. A contemporaneous report, paired with a price adjustment clause, is the usual support. See estate freeze.
• Related-party transactions: a sale to a family member, the owner's holding company or another buyer not dealing at arm's length, at a price other than fair market value, can lead to deemed proceeds or a deemed cost under the Income Tax Act.
• Disputes: when a shareholder exercises dissent rights under section 185 of the Ontario Business Corporations Act (OBCA), the court can fix fair value and appoint appraisers to help; in an oppression case, it can order a buyout at a price it sets. If a valuator testifies as an expert at trial, the party calling them must serve a signed report that meets Rule 53.03 of the Rules of Civil Procedure, including the expert's signed acknowledgment of their duty to the court.
• Sales: in an open-market sale, negotiation sets the price, so a calculation-level report or a broker opinion is often enough for pricing. A sale to a single insider, such as a partner or a management buyout team, is different: with no market test, a stronger report protects the seller.

A valuation conclusion is rarely the cheque at closing. Many private-company valuations conclude on enterprise value, on a cash-free, debt-free basis with a normal level of working capital. The purchase agreement then converts that number into a price:

1. Debt is repaid, and surplus cash is dealt with, at closing.
2. A working capital adjustment moves the price up or down against an agreed target.
3. Part of the price may be deferred through vendor financing or made contingent on an earn-out, which shifts risk to the seller.
4. In an asset sale, the price is allocated among asset classes, including goodwill, and each side's tax result depends on that allocation.

The valuation date matters too. A report dated last year may not reflect a lost customer or a new contract. If the parties will rely on a report to close, the agreement should name its author, level, standard of value and date, and say what happens if results change before closing.

Nasreen Bhatti and Piotr Zielinski own a Vaughan commercial flooring contractor 60/40. Their shareholder agreement says that if either retires, the other buys at fair market value determined by an independent CBV at the Estimate level, with no minority discount.

Piotr gives notice at 63. A broker who has been courting Nasreen says the business would list for $3.6 million, based on a multiple of seller's discretionary earnings. Piotr asks for 40% of that figure, or $1.44 million.

Nasreen's lawyer points to the agreement: a broker's listing opinion is not the contractual standard. The two jointly engage a CBV. The Estimate report concludes that the fair market value of all the shares is $2.9 million to $3.2 million, with a point estimate of $3.05 million. It notes that the broker's figure added back Nasreen's full salary, although the business would need to pay a general manager to replace her.

Piotr's 40% is valued at $1.22 million. Nasreen pays $420,000 at closing, and the $800,000 balance over four years under a promissory note secured by a general security agreement. Because the agreement had fixed the valuator, the level, the standard of value and the discount question in advance, neither side could insist on its own number, and the buyout closes in seven weeks without litigation.