Intangible assets

Now the question arises, why should anyone pay more for anything than the fair value of what you can see and touch?

Buyers may be persuaded to pay a little extra if they can understand what it is for. They may be prepared to pay for a company's good reputation, a solid customer or client base, a strong and recognisable brand, an especially gifted workforce, proprietary technology, and anything else that creates advantage over competitors.

Goodwill shouldn’t be confused with these other assets that are intangible but identifiable.

Formulations, designs, trademarks, proprietary technology and patents are also intangible assets. However, since they can be attributed to specific items, they are identifiable assets and have a value which can be separately negotiated.

But goodwill is the secret sauce or magic ingredient that binds these tangible and intangible assets together and turns them into a business that makes money.

An essential ingredient in this sauce is - customers.