Goodwill is one of your business assets – but you can’t measure it and it’s very tricky to put a price on it. When you sell your business, goodwill is the intangibles in your business that add value beyond the physical assets and guaranteed income stream.
Goodwill includes:
Your brand’s great reputation
Your loyal customer base
Your positive customer relationships
Your happy employees who want to stay
Proprietary data and intellectual property
The great systems that make your business run smoothly
Goodwill can have an impact on the value of your business
Most small and medium-sized businesses in New Zealand are sold based on their assets and earnings, and goodwill isn’t much of a factor in the valuation. But some types of businesses do have significant value in their intangible assets, particularly in the tech sector.
Discovering the value of your business’s goodwill usually comes down to the negotiating process with a potential buyer. You’ll need to agree on what the business is worth, and that means agreeing on the price of those 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.
