GOODWILL valuation?

[Kaapie]

Goodwill is generally the price paid less the tangible assets. But that's from a buyers perspective.

From a seller's perspective, is there a benchmark that is generally used?

As an eg:
A business averages a million in monthly turnover, gp at 28% on sales, which nets down to 10 -12%.
In 8 years, the last 6years have all been in the black, Sales, and stockholding has steadily, incrementally increased.

Can turnover, gp or np be used over a period as goodwill value?

 

[G.A.S]

Goodwill is generally the price paid less the tangible assets. But that's from a buyers perspective.

From a seller's perspective, is there a benchmark that is generally used?

As an eg:
A business averages a million in monthly turnover, gp at 28% on sales, which nets down to 10 -12%.
In 8 years, the last 6years have all been in the black, Sales, and stockholding has steadily, incrementally increased.

Can turnover, gp or np be used over a period as goodwill value?

In general, the total value is calculated via a valuation, whether a discounted cash flow approach (that is forecasting future cash flows and discounting them to present value), a market based (multiples) approach (e.g. based on a sales, ebit or similar multiple) or Net Asset Value (NAV) approach (see also: https://www.pwc.co.za/en/publications/valuation-methodology-survey.html ). You can also refer to Damodaran's website for benchmark type data.

Depending on the purpose, you might want to speak to your accountant (CA) or auditor.

 

[Forum Reader]

I've done rough calculations for businesses before (insurance space).

Goodwill value was usually around 3x-5x VNB (present value of future profits from all new business sold in the year).

There is also a bit more added on depending on the brand value, but usually not much in the space I worked in.

 

[smc]

Goodwill generally isn't valued directly - it's just there so that the left hand side of the balance sheet matches the right hand side. Company valuations depend on the nature of the business. Stable businesses can usually be valued by a multiple of turnover, startups, or business that will change dramatically over the next several years via a DCF on projections, asset heavy companies, e.g., property companies, by asset value.