When you put up your business for sale, you need to look at all your assets. While many are easy to place a value upon, others are not. A business in Santa Clara County CA may have certain intangible assets. They add to the value but a potential buyer may consider some detrimental. Of particular concern is what is known as “personal goodwill.”
What Is Personal Goodwill?
Several definitions of goodwill exist in the business world. Even the Internal Revenue Service (IRS) has its own way of quantifying it. What is of specific concern is not simply goodwill but “personal goodwill.” This value of the business results from the individual who performs the services not the actual business itself. In other words, the owners’ established relationship with the companies and/or suppliers is responsible for much of the success of the company. The owner may also possess technical expertise or professional excellence that provides economic benefits to his or her business.
The Problem with Personal Goodwill
When it comes time for selling the business in Santa Clara County CA, personal goodwill represents the value of the individual owner. It is an intangible asset. It is worth that an individual and not the business owns. This is an issue with many potential purchasers. How can they seriously consider buying a business for sale when much of its value is the result of the actions of a single person? A question the seller has to ask him or herself – and discussion with a business broker can help – is how to mitigate if not remove this potential deal breaker?
Possible Solutions
The best possible approach is to alter the personal goodwill into commercial goodwill. This is something a potential buyer can recognize, and your business broker can translate, into a positive selling point. This involves making sure you transfer your skills and personal business relationships in some manner that will benefit the company.
One means of doing so is training and dissemination. Pass on your knowledge to employees certain to remain with the business. Groom them to be able to handle the intangible – to become the individual or individuals responsible for the company’s personal goodwill assets.
Business for Sale
Personal goodwill is one reason why some businesses thrive. The owner in Santa Clara County CA establishes a solid and profitable relationship with suppliers and customers. While the relationship translates into profit for the company, it may cease to exist once the individual is gone. This can be a detrimental factor in a sale. If you want to put up your business for sale and make a profit, it is important to translate any intangible personal goodwill into quantifiable commercial goodwill.
