Definition
Goodwill is the intangible value of a business — customer relationships, brand reputation, workforce, processes, and market position — that exceeds the value of its physical assets. In SMB acquisitions, most of the purchase price is typically goodwill. A high goodwill component (relative to tangible assets) increases owner dependency risk because the value may be tied to the current owner.
Worked Example
A dental practice sells for $700,000. Its physical equipment and fitout are worth $150,000. The remaining $550,000 is goodwill — the value of its patient base, location, and established reputation.
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