
Since the largest part of the purchase price of a profitable small business is usually goodwill, it is important to have knowledge and understanding of just what goodwill is and why there is value in it.
Business value is not built solely on the accumulation of tangible assets, such as equipment and machinery, but also on the intangibles, known as goodwill, that contribute to its profitability. The value of a business is determined by its ability to generate cash flow and the risks associated with consistently producing that cash flow.