We all know that the worlds of finance and corporate accounting are two of the most competitive fields in the world. With millions of new business graduates entering the workplace every year and individuals from other fields making a move to finance and accounting as well, it will only become more difficult to gain an edge, when trying to carve out your spot in these fields.
TUTORIAL: Financial Careers
As has become quite common, more and more individuals are finding that a bachelor's degree just isn't enough anymore, when held up against others who hold an advantage in experience, education or both. With that being said, maybe you too should be looking into pumping up that resume with a professional designation that specializes in a more particular field, rather than going at it with a jack-of-all-trades approach.
While many are familiar with the "big" finance professional designations, such as the Chartered Financial Analyst (CFA) or Chartered Accountant (CA), few are aware of a fast-growing designation offered in Canada that focuses on the even faster-growing field of business valuation: the Chartered Business Valuator designation. In this article we will introduce you to the CBV and why it may be the right professional designation for those looking to specialize in the field of valuation.
Business valuation itself is a fast growing field in finance, as demand for professionals who can value both private and public firms grows seemingly every year. Whether it's a business owner looking for an exit opportunity from their life's work, or larger firms looking to buy up smaller competitors, having someone who can place a trustworthy value on a business is becoming more and more crucial. With demand for these individuals at an all-time high, obtaining a professional designation in business valuation may be a good decision for those interested in getting into the field.
Chartered Business Valuators: History
The Canadian Institute of Chartered Business Valuators was founded in the early 1970s by a group of valuation professionals. It was founded following the introduction of a capital gains tax in the country, which would lead to an increased need for business valuation. Since that time, the Institute has grown by leaps and bounds, with nearly 1,500 members in 2011. CBVs must adhere to a strict standard of professionalism, along with a code of ethics, both of which are reviewed and updated to meet the highest standards. Due to the nature of the work (which we will discuss later on in this article), it is of the utmost importance that CBVs remain impartial, in order to provide truly fair estimates of valuation.
Before being eligible for the CBV designation, potential candidates must first have a post-secondary degree, or CMA, CA, CGA or CFA designation. Potential candidates must then register for, and complete, a program of studies that is made up of six courses; four core courses that cover business and securities valuation, along with a law and taxation course, and a list of electives that can be chosen by the candidate to round out his or her course line-up.
The course of studies is intended to be a three-year endeavor, however, registered students can take as many courses per semester as they wish, in order to finish earlier than intended. As a plus for CFA charterholders, the CICBV offers a two course exemption from its private and public company courses, allowing CFA charterholders to only have to complete four of the required courses. Additionally, Americans who hold the equivalent designation of ABV-BV, provided by the American Society of Appraisers, can be exempted from certain requirements. (Interested in pursuing a CFA before a CBV? Read An Introduction To The CFA Designation.)
Along with the course work, CBV registered students must also meet the work experience guidelines, which mandate a minimum of 1,500 suitable work experience hours before the candidate is eligible to write the entrance exam. While the definition of "suitable" is not black and white, one can visit the CICBV website for details on what type of work is eligible.
Along with the preceding two technical requirements, CBV candidates must also have the backing of a CBV sponsor and be of "good character and reputation," which basically means that you meet the standards and ethics that institute members abide by.
Once all of these prerequisites are satisfied, registered students can then sit for the membership entrance exam, which covers all areas of valuation the hopeful students will have studied and encountered in their work experience leading up to the exam. (For more on methods used by valuators, read An Introduction To Corporate Valuation Methods.)
Offered only once annually, the exam is four hours in length and is delivered in case study form. The areas tested include sections from the pre-requisite courses the registered student will have completed during the course of the program. Of course, business valuation methods and examples will be important parts of the examination, but more qualitative sections, such as issues faced in valuation and professional conduct guidelines area also important to an exam writer's success.
Practice and sample exams are available and soon-to-be writers would be well-served to review these prior to entering the actual exam, in order to get a sense of what to expect on exam day. Overall, the belief among those questioned is that a registered student should put in at least 100 hours of study time to be successful on the membership entrance exam.
While CBVs will gain a large amount of experience in fields outside of true business valuation while making their way through the program, business valuation is still the greatest and most apparent skill obtained. Valuation techniques will include discounted cash flow estimation, comparable business evaluation and the transactions approach. The key driver of business valuation is cash flow and EBITDA, because one can usually place a value on a business as a function of the growth rate of its future cash flows. This is only true for profitable businesses, however, since businesses with negative earnings cannot by valued using such an approach. In these instances, students will be taught how to use multiples (EBITDA/EV, EV/R, etc.) of comparable public firms or those paid in the purchase of a similar business, to place an estimated value to the business.
As one can imagine, business valuation in most instances, especially when it comes to private firms, can be quite subjective, so CBV students are taught that justification and reasonability of a valuation is key to generating a price that they can stand behind.
With the designation come opportunities to enter into areas of finance that students may not have had the ability to work in previously. Much like CFA charterholders or Chartered Accountants, CBVs are not necessarily pigeon holed into working in any one industry. Although their expertise lies in valuation of private and public firms, CBVs will also have a strong background in taxes, financial forecasting and data analysis. CBVs today are employed in accounting firms, investments banks, pension funds, private equity and venture capital firms and corporate advisory businesses.
Additionally, CBVs also hold positions in a wide variety of other businesses and industries, offering their distinct and comprehensive business valuation knowledge to their employers and clients. For those interested in working in private equity or underwriting the next big IPO, the CBV designation gives you the educational background and real-world prerequisite experience to succeed in those highly competitive fields. You can also offer small business owners your valuation expertise when deciding whether to sell their businesses and for how much. The opportunities for CBVs in the fields of finance and accounting are great and only growing greater.
The Bottom Line
We hope that this quick introduction to the Chartered Business Valuator designation has opened your eyes to a professional designation that the vast majority are unfamiliar with. While most will choose to pursue a CFA or professional accounting designation to augment their formal education and work experience, the CBV designation may offer you a specialization that may have not entered your mind.
Valuation is a fast-growing field, and the CBV designation is one of the world's most highly respected designations when it comes to this field. (For more on evaluating potential career paths in finance, check out Financial Career Options For Professionals)