How to Value Goodwill When Selling a Business

By Jon Wilde

When it comes to selling a company, many owners are unsure what goodwill really means, how it is calculated, or how much it could be worth. Unlike physical assets, goodwill reflects the reputation, relationships and future earning potential that make your company attractive to buyers.

At KBS Corporate, we have completed more company sales than any other UK adviser for eight consecutive years and the first half of 2025. We help entrepreneurs across all sectors maximise the value of their goodwill, combining market-leading expertise and unrivalled buyer reach so company owners can achieve the maximum outcome for their sale.

In this guide, we’ll explain:

What does goodwill mean when selling a company?
How much is goodwill worth when selling a company?
How do you calculate goodwill when selling a company?
How can KBS Corporate support me with practical steps to highlight goodwill and protect it in my sale?

Maximising the Value of Your Goodwill
With over 25 years of experience and the UK’s largest active buyer network, KBS Corporate, ranked No. 1 by LSEG & Experian, ensures the intangible value of your goodwill is fully recognised and maximised in your company sale. Start your confidential enquiry today.

What Does Goodwill Mean When Selling A Business?

Goodwill represents the intangible value of a company when selling a business – the difference between what a business is worth on paper and what a buyer is actually willing to pay. While tangible assets like property, machinery or stock are easy to measure, goodwill captures the less visible qualities that make a company attractive.

As stated in HMRC’s Capital Gains Manual, goodwill is the “benefit and advantage of the good name, reputation and connection of the business…the attractive force which brings in custom”. In practice, this means goodwill often includes:

Reputation and brand strength – Recognition in the market that sets the business apart.
Customer loyalty – Long-standing relationships that make revenues more predictable.
Supplier connections – Established, trusted partnerships that keep operations stable.
Staff experience and loyalty – Teams with knowledge and skills that new owners can retain.
Documented processes and systems – Efficient operations that reduce reliance on the owner.

Example: Imagine two construction companies pitching for a building project. Both offer the same service at a similar price. One is newly founded, while the other has traded for years with an established reputation, strong branding and experienced staff. On paper, their assets may look identical, but the established construction firm will command a higher price because of its goodwill.

For many sellers, goodwill is where the true value of their company lies. At KBS Corporate, we ensure this hidden value is recognised, marketed and maximised by creating competition among buyers. We can do this for businesses of every type, size and sector — demonstrating that we are far more than just a business broker service.

Client Success Stories: Maximising Goodwill Value
“We employed KBS to sell our business. They supported us throughout a very in-depth process and made it much easier. The professionalism and approach of Guy Haynes and Daniel Greenfield stood out – we would absolutely recommend them.”
Justin Williams, previous owner of Fire-Us Ltd

Why Is Goodwill So Important to Buyers?

Goodwill is often the difference between a company’s shareholder equity and the price a buyer is willing to pay. For buyers, it represents future earnings potential and a competitive edge that cannot be replicated overnight. Without goodwill, a buyer might ask: “Why not just start a new business from scratch?”

Key reasons why buyers place value on goodwill include:

Predictable revenue streams – Loyal customers, recurring contracts and established client relationships reduce risk.
Competitive advantage – A strong brand, protected intellectual property or prime location can give a buyer an edge over competitors.
Operational continuity – Documented systems, trained staff and efficient processes allow the business to run smoothly after a sale.
Market reputation – A well-known and respected company attracts both customers and quality staff, accelerating growth potential.

By recognising these drivers, buyers are willing to pay a premium above net assets, making goodwill a key factor in the final sale price.

At KBS Corporate, we ensure that every element of your company’s goodwill is highlighted and communicated effectively in marketing documents, giving buyers confidence in the intangible value they are paying for.

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How Do You Calculate Goodwill When Selling A Company?

Calculating goodwill can be complex because it is intangible, subjective and influenced by both tangible results and the perceived future potential of the company. Here are the most commonly used methods to determine goodwill value:

The Simple Multiple Approach

This method is often used for SMEs, applying a multiplier to sustainable profits before the owner’s remuneration. Multipliers typically range from 1 to 5, with higher figures for companies demonstrating strong growth and profitability, and lower figures for those in decline.

Example: A company generates £300,000 pre-tax profit plus £100,000 owner remuneration (total £400,000). Using a multiplier of 1, the goodwill would be £400,000. Adding net assets of £50,000 gives a total company valuation of £450,000.

Pros: Simple and easy to apply, widely understood.
Cons: Does not account for unique factors or intangible drivers beyond profits.

The Turnover Approach

Used primarily in professional practices such as solicitors, accountants or architects, this method applies a multiplier to turnover rather than profit. Multipliers usually range from 0.5 to 1.5, though they can be higher for profitable, growing firms or lower for declining ones.

Example: A firm with £2.5million turnover might use a 1.0 multiplier to estimate goodwill at £2.5million, whereas a comparable publicly listed firm might trade at 1.4x turnover. This approach is more subjective because it depends on client quality, financial health and historical performance.

Pros: Useful when profit-based methods are unreliable.
Cons: Highly subjective; can vary significantly between buyers.

Whole Company / Market Valuation Less Net Assets

This method is common for larger companies. It values the entire company first, then subtracts tangible and intangible assets (excluding goodwill) to determine the residual goodwill.

Example: Apply a Price/Earnings (P/E) ratio to post-tax profits to arrive at the company valuation. Subtract the fair value of net assets (including property uplifts) to calculate goodwill. If the result is less than net assets, the goodwill may be minimal or even non-existent.

Pros: Accounts for the full business picture and market conditions.
Cons: Requires more data and analysis; may undervalue smaller intangible factors.

At KBS Corporate, our experience has shown that valuation models only tell part of the story. The real value of goodwill is often unlocked by creating competition among buyers and highlighting intangible assets like brand strength and customer loyalty.

With over 25 years of experience and the UK’s largest active buyer network, KBS ensures these drivers are fully recognised, often pushing goodwill value beyond what traditional calculations suggest.

How To Maximise Goodwill When Selling Your Company (And Why Expert Guidance Matters)

Goodwill is often the most valuable component of your company, yet many owners underestimate its potential. Maximising goodwill requires not just understanding its value but strategically presenting it to buyers. At KBS Corporate, we help sellers highlight every element that makes their business unique, ensuring buyers recognise the full value of their goodwill.

Here’s how we can help:

Goodwill Driver	How KBS Corporate Highlights It
Customer and Supplier Relationships	Demonstrates loyalty, recurring revenue and future stability, showing buyers that cashflow is predictable and partnerships are secure.
Brand Strength and Market Reputation	Showcases awards, recognition and marketing materials to signal competitive advantage and highlight the business in the marketplace.
Skilled, Experienced and Loyal Staff	Presents organisational charts, staff retention plans and succession readiness to assure operational continuity and expertise retention.
Documented Systems and Processes	Provides manuals, SOPs and workflow examples so buyers see how the company can run efficiently from day one.
Intellectual Property and Unique Assets	Highlights patents, trademarks and proprietary processes to demonstrate exclusivity and long-term growth potential.
Future Growth and Market Opportunities	Uses market research and sector insights to quantify potential, leading buyers to see the premium value of growth prospects.

Why Expert Guidance is Critical

Accurate Valuation: Determining what goodwill is really worth requires experience, market knowledge and professional judgement – not just formulas.
Marketing for Maximum Impact: KBS creates high-quality, buyer-focused marketing documents that emphasise goodwill drivers and generate competition.
Negotiation Power: Expert-led processes ensure buyers recognise intangible value, often pushing goodwill beyond calculated estimates.
Risk Mitigation: Professionals anticipate buyer concerns, address them proactively and maintain confidentiality while protecting value.

Partnering with KBS means your company’s goodwill is fully leveraged to achieve the strongest possible sale price. From identifying value drivers to creating competitive tension among buyers, we ensure every aspect of your intangible assets contributes to maximising your outcome.

Maximise Goodwill Value When Selling Your Company with KBS Corporate

Goodwill is often a hidden, yet the most crucial, asset in any company sale. It represents the value buyers are willing to pay above net assets for reputation, loyal customers, skilled staff and operational systems – the intangibles that make your business stand out.

As we’ve explored, there are multiple ways to calculate goodwill. Each method has its advantages, but none fully captures the true potential without a strategic approach to highlighting value.

Maximising goodwill requires expert insight: identifying what makes your company unique, presenting it effectively to buyers and creating competition that drives price. With KBS Corporate’s 25+ years of experience and the UK’s largest active buyer network, we ensure every aspect of your intangible assets is leveraged to achieve the strongest possible sale outcome.

Ready to discover how much goodwill your company is worth? Contact KBS Corporate today and start maximising the true value of your company.