What is "goodwill" when buying a business?
Goodwill is the intangible value of a business such as its branding, clientele, customer loyalty, patents, technology and other value that makes the business. It is what makes the purchase price of a business higher than just the fair market value of all its assets less liabilities.
How do you calculate goodwill?
If a business has an asking price of $200,000, has assets of $100,000 and liabilities of $50,000.
Use this formula to work out the value of goodwill in a business:
Goodwill = Price - (Assets + Liabilities)
Goodwill = $200,000 – ($100,000 + $50,000)
In this case, the goodwill is valued at $50,000.
Goodwill Calculator
Purchase price of the target business
Market value of assets in business
Market price of liabilities in business
Value of goodwill
Calculator Disclaimer
The results from this tool should be used as an indication only and does not constitution financial advice. Always seek professional advice prior to purchasing a business or making a serious business decision.
