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Goodwill Westlands
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mulla
#1 Posted : Sunday, February 23, 2014 1:13:16 AM
Rank: Member


Joined: 6/15/2013
Posts: 301
Hi Wazuans,
There is this guy thinking of selling his business at the heart of Westland's for 3.6m. Its a ground floor store.
The 3.6m is goodwill and for immovables i.e.shelves,partitioning etc as from what i understand when he moved in 2years ago the shop was in a bad state and he had to do floors and interior decor.
I cant imagine the interior works would have cost him more than 1m(max1.5m).
The biz is not making money, barely breaking even.
The 3.6m does not include current stock,computers and such like that are needed for continuity of the biz.
I believe there may be potential to turn the biz around...but i believe this guy thinking of selling has tried his best and it wasn't because of neglect.
What do you guys think - is 3.6m mwisho a premium to pay for a biz in Westlands that's not turning a profit.
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jmbada
#2 Posted : Sunday, February 23, 2014 7:59:31 AM
Rank: Member


Joined: 1/1/2011
Posts: 396
There's absolutely NO way of measuring goodwill. The price you ultimately pay has to be based on the valuation you've given to the business YOU intend to build. My suspicion is that the 3.6MM includes the current owner's outstanding debts + a small cushion to restart some other business.
Will all come down to your negotiating skills, market intelligence on goodwill for similar premises in the area (which I imagine you're looking for from this site). The best source for a final answer is to literally pound the streets of westlands and look into every similar type shop to see what they paid / would charge for goodwill.
Best of luck!
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XSK
#3 Posted : Sunday, February 23, 2014 10:42:51 AM
Rank: Veteran


Joined: 12/8/2009
Posts: 975
Location: Nairobi
jmbada wrote:
There's absolutely NO way of measuring goodwill. The price you ultimately pay has to be based on the valuation you've given to the business YOU intend to build. My suspicion is that the 3.6MM includes the current owner's outstanding debts + a small cushion to restart some other business.
Will all come down to your negotiating skills, market intelligence on goodwill for similar premises in the area (which I imagine you're looking for from this site). The best source for a final answer is to literally pound the streets of westlands and look into every similar type shop to see what they paid / would charge for goodwill.
Best of luck!



Very good advise!Applause
You will know that you have arrived when money and time are not mutually exclusive "events" in you life!
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sparkly
#4 Posted : Monday, February 24, 2014 2:51:58 PM
Rank: Elder


Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?
Life is short. Live passionately.
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mkenyan
#5 Posted : Monday, February 24, 2014 8:38:21 PM
Rank: Veteran


Joined: 4/1/2009
Posts: 1,883
sparkly wrote:
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?

10 million
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mkeiy
#6 Posted : Wednesday, February 26, 2014 8:39:30 AM
Rank: Member


Joined: 1/27/2012
Posts: 851
Location: Nairobi
mkenyan wrote:
sparkly wrote:
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?

10 million


20mn sales a year and one has to pay 10mn as goodwill?
What is the profit margin?
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Swenani
#7 Posted : Wednesday, February 26, 2014 9:02:35 AM
Rank: User


Joined: 8/15/2013
Posts: 13,237
Location: Vacuum
mulla wrote:
Hi Wazuans,
There is this guy thinking of selling his business at the heart of Westland's for 3.6m. Its a ground floor store.
The 3.6m is goodwill and for immovables i.e.shelves,partitioning etc as from what i understand when he moved in 2years ago the shop was in a bad state and he had to do floors and interior decor.
I cant imagine the interior works would have cost him more than 1m(max1.5m).
The biz is not making money, barely breaking even.
The 3.6m does not include current stock,computers and such like that are needed for continuity of the biz.
I believe there may be potential to turn the biz around...but i believe this guy thinking of selling has tried his best and it wasn't because of neglect.
What do you guys think - is 3.6m mwisho a premium to pay for a biz in Westlands that's not turning a profit.


The simple way i was told to calculate goodwill is as below
P/E*PAT= XXX
Less Net assets= (xx)
Less gain on property=(XX)
Goodwil= XX
If Obiero did it, Who Am I?
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accelriskconsult
#8 Posted : Wednesday, February 26, 2014 9:15:09 AM
Rank: Member


Joined: 4/2/2011
Posts: 629
Location: Nai
mulla wrote:
Hi Wazuans,
There is this guy thinking of selling his business at the heart of Westland's for 3.6m. Its a ground floor store.
The 3.6m is goodwill and for immovables i.e.shelves,partitioning etc as from what i understand when he moved in 2years ago the shop was in a bad state and he had to do floors and interior decor.
I cant imagine the interior works would have cost him more than 1m(max1.5m).
The biz is not making money, barely breaking even.
The 3.6m does not include current stock,computers and such like that are needed for continuity of the biz.
I believe there may be potential to turn the biz around...but i believe this guy thinking of selling has tried his best and it wasn't because of neglect.
What do you guys think - is 3.6m mwisho a premium to pay for a biz in Westlands that's not turning a profit.


Valuation of goodwill is a contested subject. For the kind of business you are describing, I would measure it on basis of customer loyalty...repeat customers who would continue patronizing the business once sold. If you can place a value on those customers, estimate their spent in the new business, then you are on your way to determining what goodwill to pay. Literally interpreted, the previous owner has cultivated goodwill with his customers and the relationship is an asset that keeps on generating sales.

Goodwill is not based on fixtures and fittings so the renovations should not be used as a basis. Those can be valued.
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KulaRaha
#9 Posted : Wednesday, February 26, 2014 9:28:04 AM
Rank: Elder


Joined: 7/26/2007
Posts: 6,514
sparkly wrote:
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?


Max 3.5M
Business opportunities are like buses,there's always another one coming
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Swenani
#10 Posted : Wednesday, February 26, 2014 12:05:11 PM
Rank: User


Joined: 8/15/2013
Posts: 13,237
Location: Vacuum
sparkly wrote:
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?


Whats the profit before and after tax?
If Obiero did it, Who Am I?
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KulaRaha
#11 Posted : Wednesday, February 26, 2014 12:15:28 PM
Rank: Elder


Joined: 7/26/2007
Posts: 6,514
Swenani wrote:
sparkly wrote:
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?


Whats the profit before and after tax?


Its retail. Must be clothes shoes etc. Margin is 50% nett.
Business opportunities are like buses,there's always another one coming
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Swenani
#12 Posted : Wednesday, February 26, 2014 1:24:31 PM
Rank: User


Joined: 8/15/2013
Posts: 13,237
Location: Vacuum
KulaRaha wrote:
Swenani wrote:
sparkly wrote:
How much would be the goodwill for a 1500 square feet retail shop in Nairobi CBD around Kenyatta Avenue. Making sales of about KShs 20 million per year?


Whats the profit before and after tax?


Its retail. Must be clothes shoes etc. Margin is 50% nett.


I think goodwill of 10Million should be reasonable
If Obiero did it, Who Am I?
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