Goodwill definition

Goodwill is intangible value created by a business which may be converted into tangible value.

A business' goodwill may be described as a combination of any or all of elements such as: market penetration, brand awareness, customer loyalty, size and quality of customer list, longevity in the marketplace, proprietary products, intellectual property, etc.

Practically, the goodwill elements listed above contribute to the performance of the business in its day-to-day operation.

Transactionally, goodwill may be converted into tangible value for the business owners when seeking investors, a purchaser, or even when proposing a loan from a bank.

The value of goodwill is directly influenced by the performance of the business.