Monthly Archives: September 2018

The Importance of Goodwill in a Business’ Value

The value of a business is not solely based on the accumulation of its tangible assets that can include equipment, machinery or buildings (a physical property with value). Many times, more than 50% of the value of a business is attributed to intangible assets and goodwill (not physical by nature). A business is valued by its ability to produce cash flow steadily. The goodwill value reduces the risk that a business’ profitability will stumble if the ownership changes hands.

Some important contributors to goodwill are:

Reputation                                        Brand name recognition

Websites & domain names            Trade Secrets & recipes

Customer & supplier lists               Copyrights, trademarks & patents

Licenses & permits                          Contracts

Production/Order Backlog             Accreditations

Developed processes                      Proprietary designs & know-how

Customized software                      Step-by-step training systems

Customized databases                    Publishes articles

Employee skills & experience

All of these powerful assets of goodwill add to the revenue producing ability of a business. Sometimes buyers don’t understand the value of goodwill because it is not an asset that they can always put their hands on. It is important to define the goodwill of a business when determining its value.

For more detailed information on Goodwill, please read the following article:

https://www.divestopedia.com/how-goodwill-impacts-business-value/2/1090?utm_campaign=newsletter&utm_medium=best&utm_source=08082018