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Goodwill Valuations

Goodwill valuations are the "x factor" in business valuations. Some people argue that goodwill is an extremely important value component of the total value of a business...but others argue that goodwill is overrated and that they would never pay for the goodwill of a business.

Let me ask you a question. If the total market value of Coca cola is $100 billion , how much of that value is for the brand and goodwill and how much is for the plant and equipment and how much is for the stock?

The answer is that the great majority is for the brand or goodwill. Would it matter if coca cola suddenly changed its name to chica cola? Of course!

Some business valuers consider there are three types of goodwill......

Brand goodwill

location goodwill

personal goodwill

Goodwill valuations should consider all three in a business valuation (goodwill valuations).

A Lotto kiosk in a major shopping centre could be considered to have locational goodwill.

A hairdressing salon may have risky personal goodwill because customers have have their favourite "cutter" and they may not stay with the salon if the cutter moves elsewhere.

Brand goodwill is generally enduring, locational goodwill lasts the length of the lease and personal goodwill tends to blow like the wind! When considering goodwill valuations you really need to talk to an expert and the best place to find a goodwill valuations expert is the Business Valuer Network. Contact the national co-ordinator Graham O'Hehir now on 1300 634588 and discuss goodwill valuations with graham

 

 



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