Goodwill is an important component of a business. Because not only does it contribute to the sale price of the business, but it also contributes to a business’ success. You may be wondering “how can goodwill increase business value?” Because goodwill is a combination of intangible assets that come together to strengthen the business and increase profitability.
What is goodwill?
1. Locational goodwill: When the business has a central or convenient location that directly contributes to its success. Think of a bottleshop on the corner of a BYO restaurant precinct, a travel shop within an airport or a technology store in the heart of a business precinct.
2. Personal goodwill: This style of goodwill can prove detrimental for a buyer, as the goodwill is directly associated with an employee, manager or perhaps the previous owner of the business. With that person no longer in the picture, the business may plateau or even decline.
3. Brand goodwill: A personal preference determined by the brand. For instance, Coke over Pepsi, Channel 7 over Channel 10. This can be broken down into many different variables, however, brand goodwill comes down to brand identity and brand loyalty. After all, most of us are creatures of habit and are somewhat resistant to change.
So, how can Goodwill increase business value?
Think of goodwill as your reputation. Goodwill is the way your business is viewed by the public, which can then alter the public perception of your business’ value. To improve your goodwill (and in turn, improve your business’ value) you must work on your business’ reputation. Here are some ways you can do this:
● Engage with your local community and spread awareness of your business and what you’re all about.
● Work on strategies to increase profitability.
● Create customer loyalty programs.
● Increase the touch points between your business and your customer. Check-in and see how they are going with your product/service at particular intervals. Improve the customer service experience overall.
If you’re thinking about purchasing a business and want to learn more about goodwill; or perhaps you’re considering a business sale and want to know what your goodwill is worth – contact our team today. The Core Business Brokers team will share their extensive industry knowledge and guide you through your business purchase or business sale journey from start to settlement. Contact us today at (02) 9413 2977, or email [email protected] or [email protected] to learn more.