What is goodwill?

Answer 1

When a business has provided good service or product to their customers, the customers develop a trust for the business. They become repeat customers and they tell others what a good experience they had. That creates a business asset called goodwill, in other words the good will of the customers toward the business.

Answer 2The goodwill of a business is the whole advantage of the reputation and connection with customers together with the circumstances whether of habit or otherwise, which tend to make that connection permanent. It represents in connection with any business or business product the value of the attraction to the customers which the name and reputation possesses. Its elements can be market penetration, brand awareness, customer loyalty, size and quality of customer list, longevity in the marketplace, proprietary products, intellectual property, etc. Answer 3

• Goodwill is a value of the attractive force that generates sales revenue in a business, and adds value to its assets.

• Goodwill is an intangible but salable asset, almost indestructible except by indiscretion.

• It is built painstakingly over the years generally with:

  • heavy and continuous expenditure in promotion,

  • creation and maintenance of durable customer and supplier relationships,

  • high quality of goods and services, and

  • high quality and conduct of management and employees.

• Goodwill includes the worth of corporate identity, and is enhanced by corporate image and a proper location.

• Its value is not recognized in account books but is realized when the business is sold, and is reflected in the firm's selling price