Are you planning ahead for the sale of your shop?

This will not be you if your business’s goodwill turns out to be personal

It’s never too early to plan for the day you’ll want to sell your shop. There are things you should know so that you can start from day 1 of your business to get as much as you can when you eventually decide to sell.

The first thing you want to ensure is that as you grow your business you allow it to develop it’s own identity quite apart for yours—and definitely apart from the identity of any of your employees. The reason is because of a thing called “goodwill.” Not to get too technical here, but goodwill will be part of the price that you’ll be asking—the intangible part over and above the value of the tangible assets. Intangible (literally: “cannot be touched, invisible”) goodwill exists but not in the way tangible assets such as cash, vehicles, equipment, buildings and so forth exist. Goodwill can include a number of Intangibles such as the business’s good reputation, a loyal customer base, a convenient location, and other elements that keep customers coming and therefore contribute to the value of the business.

But here’s the thing about goodwill, it has no value to a buyer if it is deemed to be “personal” goodwill. So if customers are drawn to the business because of the reputation of the owner or a key employee as an excellent technician, a great personality, or some other attribute, that benefit goes away if the owner or employee goes away after the sale of the business. This is personal goodwill and why would a buyer pay for it if it goes away with the seller?

So, in anticipation of one day selling your shop, let it develop it’s own goodwill independent of you, the owner, or a key employee.