Goodwill and Its Importance to Your Business

What exactly does the term “goodwill” mean when it comes to buying or selling a business?  Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business.  In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business.  It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business. According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market.  If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role. Goodwill most definitely contrasts and should not be confused with “going concern value.”  Going concern value is usually defined as the fact that a business will … [Read more...]