Quick! What is the value of your HVAC contracting business? Is it taxable income times three? Taxable income times five? Or is it the value of the assets minus debts? It is literally your million dollar question that you need to know.
In the past 10 years, there has been a trend in the U.S. to consolidate (and sell) companies. Many clients have contacted appraisers to assist in buying or selling a business. A component in determining the value of a company is goodwill. Often in the process of determining the value, clients are surprised at what their business is really worth beyond the net value of the company’s assets. This additional value is what is known as goodwill. Just as surprising as the additional value goodwill can add to the value of a company, is how it is formulated. This article will inform the reader of what goodwill is and how it is calculated using acceptable methods.