Goodwill Hunting

As an aspiring freedom-preneur, it is important to note that having more freedom requires implementing systems. This means employing and/or investing in resources, processes and measures that mean your business is not solely reliant on you. If your business could come to a grinding halt if you (or any of your team) suddenly became unavailable, that’s not a good thing!

If you’ve ever bought or sold a business, or even considered buying one, you’ll know that the sale price invariably includes a component called goodwill. If you are not aware, the price of goodwill effectively relates to all the intangible assets a business may possess. This means the assets over and above the value of all the physical/tangible assets included in a business sale.

So what exactly are these intangible assets?

Intangibles assets can come in many forms

For example, all the following resources can contribute to how much goodwill is knocking around in a business:

  • Quality of products
  • Skill of the workforce
  • Business’s location(s)
  • Business’s reputation
  • Customer loyalty factor
  • Quality of management
  • Business’s intellectual property (e.g. any patents or proprietary technology, documented systems; e.g. standard operating procedures)

How much goodwill does your business have? If you are about to sell your business and you think it’s worth $XYZ, it will really help to know just how much of that relates to goodwill. And whether or not you can justify that aspect of price to a prospective buyer.

As a prospective buyer, you should want to know how strong that goodwill justification really is and how long it will last when the vendor walks out the door for the last time.

The point is, unless goodwill is systematically built into the day to day running of a business, (as opposed to tied to a couple of key products or personnel), the goodwill value will disappear very quickly from the balance sheet and consequently, the future value of the business. Especially if it’s all in the head of one or two key people who move on after the sale takes place.

If you’re a business owner and you haven’t already done so, start looking at each of the above bullet points and find ways to systematically quantify them. For example, look at all your resources and analyse the processes for which they’re used. Then commit to excellence and set about raising the performance standards in each area.

The key to success here is discipline and habits and employing good ‘systems’ people; i.e. people who enjoy the rigours of regular data analysis and using it for effective decision-making. The return on investment will invariably show up at sale time. When the value of your business to true business investors will stand out like a homing beacon!

Track down the goodwill in your company and rest assured you will achieve a better sale price and a shorter sale time.

Happy hunting my friend!

Click here if you want to learn what digital nomad tools we use to be a digital nomad family

To success and significance. Give. Take. Invest. Enjoy.

Colin

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