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How do you determine goodwill of any organisation?
If it is the name, Is it really a good decision to pay huge amount for mere name or the location?
The value of business goodwill can be determined using the methods under the Cost (Asset), market and income valuation approaches.
1. 1. This method determines the business value based on the value of its assets. The idea is to determine the business value based on the fair market value of its assets less its liabilities. The present value of income is the measure of your business goodwill.
2. 2. This method determines the business value in comparison to historic sales involving similar businesses. A relationship between the business economic performance, such as its revenues or profits, and its potential selling price.
3. 3.This method determines the value of a business based on its ability to generate desired economic benefit for the owners. It determines the business value as a function of the economic benefit.
It is the benefit or advantage of good name, reputation and connection. A businessman pays to place himself in a position to earn more by goodwill then his efforts. It is good decision to pay for more benefits & profit.
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