What is Goodwill?
One of the major issues of concern for small business owners today is: how do I build and value the goodwill of my business? The true value of any smaller business, or large business for that matter, is not the break-apart value of its tangible or hard assets. The true spirit and value of the business resides in the reputation, logo, trademark, lease value, web site, policies and procedures manuals, business plan, and perceived quality on the part of the customers and community; also known as goodwill. Goodwill, like all other important intangible business assets, is very real, but invisible.
Trucks, machinery, inventory, human resources, and raw materials don’t make a profit all by themselves. The organizing, controlling, coordinating, planning, and unifying power in the business is what brings everything together and produces the “spirit” of the business that results in cash flow and profit. In simple terms, goodwill is that portion of business value over and above the expected return created by the other, tangible assets of the company, such as furniture, fixtures, and equipment. Goodwill may be an important component of your business’s value, or of the one you are purchasing. At Coast Business Brokerage we take the time to determine its true value for you.