How to Measure the Owner’s Personal Influence on a Company’s Goodwill

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by a searcher from Pontificia Universidad Catolica de Chile
in Santiago de Chile, Región Metropolitana, Chile

1yr ago

How to Measure the Owner’s Personal Influence on a Company’s Goodwill

Beyond gathering the logical information on margins, revenues, assets, and customer diversification, it is crucial to assess how the current owner’s personal influence affects key commercial relationships. This involves evaluating whether agreements with customers and suppliers rely directly on the trust or personal connection with the owner, and if there is a risk of these relationships weakening after their departure. Factors such as the stability of commercial contracts, customer loyalty to the brand rather than the individual, and the level of institutionalization in sales and procurement processes are critical to consider. Identifying these elements allows for a more accurate adjustment of the goodwill valuation, ensuring it reflects the company’s intrinsic value rather than the owner’s presence.

What tools or strategies have you used to address this analysis in your acquisition processes?

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reply by a lender 1yr ago
in Stuart, FL, USA

To break it down to its most basic concept. The seller and his involvement should be "wanted" not "needed". If it is needed, the goodwill is more dependent on him. Figure out what elements of the business "need" him and work backwards from there. Once you have all the areas of operations covered, compile an average and discount accordingly.

reply by a searcher 1yr ago
from The University of Queensland in Sunshine Coast QLD, Australia

A few tips i heard from others is to look at company reviews online, and if they often mention the owner by name, then you may assume they are personally involved in many sales. Another is to ask if you can go for for a ride along with the owner for a few hours, and during this time notice how often their phone rings, if it is many times and business related, then you may assume a high level of involvement from the owner. These are not perfect methods, and will only give you an indication of involvement and not a hard data point, but may complement other methods others have mentioned.