In general, there are three main types of goodwill: corporate, personal and location. You may have one or a mix of these. Different types of goodwill have different values. Typically corporate goodwill is the most valuable. Let’s have a look at each:

Corporate goodwill is the value items such as brand, business presence, an excellent client database, and repeat customers add to the value of the business. When we talk about a brand, we are talking about something that is recognised, not just a logo. For example, if a potential customer needs to buy a product that you sell, is your brand the first one they think of? This type of brand value can simply be relevant to the area you operate within.

When we ask business owners what differentiates their business from others, one of the commonest responses is “personal service”. Your customers or clients come to you because they like dealing with you. That’s personal goodwill. Your customers stay with you because of the strength of the relationship that you have developed with them. That’s excellent if you are the owner but when it comes to selling your business, personal goodwill is generally worth less to the new owners. They will need to establish their own relationship with your customers, and some may be lost along the way. If this sounds like your business, then you should think about how you can broaden your goodwill so that the value attaches to the business as well as the person.

Location goodwill is where the location of your business delivers a result for the business. For example, a service station on a major road that is convenient for motorists to enter and exit. If you have location goodwill, the value of the goodwill is determined by factors such as whether you own or lease the location, how long your lease is for and anticipated changes and development in the area.

Every business owner should operate with their end position in mind regardless of whether you expect to sell or hand your business down to the next generation. For assistance to build your business value, talk to us today.