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.