What is goodwill when selling a business?

Goodwill generally represents the value of a business beyond its physical assets. It may include an established reputation, loyal customers, brand recognition, recurring business, operating systems, trained employees, and other intangible strengths that contribute to future earnings.

For many established businesses, goodwill represents a significant portion of overall value because buyers are investing in the ongoing success of the business—not simply purchasing equipment or inventory.

Understanding goodwill is often an important part of understanding overall business value.