Goodwill: What’s it worth?

Goodwill, an intangible asset, plays a crucial role in your business, although it poses challenges when it comes to measurement and valuation. When selling your business, goodwill represents the intangible elements that contribute value beyond tangible assets and guaranteed income.

Key components of goodwill include:

• Your brand's excellent reputation.

• A loyal customer base that trusts and supports your brand.

• Strong customer relationships characterized by positive experiences.

• Content and satisfied employees who exhibit loyalty and commitment.

• Proprietary data and intellectual property unique to your business.

• Efficient systems that streamline operations and enhance productivity.

Goodwill can have an impact on the value of your business

The impact of goodwill on your business's overall value cannot be underestimated. While most small and medium-sized businesses in New Zealand are typically valued based on their assets and earnings, the significance of intangible assets, especially in the tech sector, should not be overlooked.

Assessing the value of goodwill typically arises during negotiations with potential buyers. It necessitates reaching an agreement on the business's worth, which entails determining the price of these intangible assets.

Tax on goodwill

Usually you’ll only need to think about goodwill if you’re buying or selling a business. Goodwill is non-taxable for the vendor in a business sale and non-deductible to the purchaser (although there are exceptions; you can read more about tax on business asset sales here).

Goodwill cannot be depreciated like a physical asset. However, some types of intangible property, like patents or trademarks, can be depreciated, so talk to us if you think this might apply.

What is your business’s goodwill worth?

We can help you work out the value of your business in today’s market – get in touch and we can figure out how much money you could walk away with if you sold in today’s market.