[sunreas]

I've always wondered how a business that is being sold sets or determines what to ask for "good will"? I'm thinking there is a formula that is a starting point. Can someone help?

[Robert Ball]

As a rule, the value of a company being sold bears some relationship to profitability, cash flow, revenue, size of market, growth stage/size, etc. AND valuations vary based on industry, location, and other market factors. In some industries even the vocabulary is different - in the auto industry, goodwill is referred to as "blue sky".

The best thing to do is to start with what sort of company you are selling, how big it is, etc. and then talk to your accountant or lawyer. If it's a local dry cleaners, then chances are there's an accountant in town who knows the revenue/profit multiples that dry cleaners can command in that area. If it's an independent insurance agent, there are 40-50 recognized experts across the country who value them based on multiples of "book of business", with variations by type (life insurance vs. property/casualty, for instance). If it's a large multi-million dollar business (or 100s of millions), you are talking hiring an investment banking firm to perform an in-depth valuation assessment (where they compare your company to others, public and private, and come up with a valuation).

Hope this helps. If you can provide a few more specifics, might be able to shed more light.

[Ladybugg]

A Certified Valuation Analyist (CVA) in your area should be able to help you. They perform business valuations for a living and are usually associated with a public accounting firm. Let me know if you would like additional information.