When someone asks what a business is worth, most people reach for the balance sheet. It’s the wrong starting point. The balance sheet reports historical cost — what was paid for equipment, inventory, and property when acquired, reduced by depreciation. That figure may bear little resemblance to what those assets would actually sell for today. And it tells you nothing about what a buyer would pay to take over the business as a running operation. There are two distinct numbers worth understanding here. The liquidating value is what you’d recover selling the assets piece by piece, paying off the debts, and closing the doors. It depends on today’s market conditions, not accounting history. The going concern value is what someone would pay to acquire the business as a running operation — same equipment, same location, same staff — with the expectation that customers keep coming through the door. For most successful service businesses, this is substantially higher. The difference is goodwill. Goodwill isn’t automatic. It exists only if the customer relationships would survive the ownership change. A hair salon with a loyal neighborhood clientele probably has transferable goodwill. A solo attorney whose clients retained her specifically for her courtroom judgment probably doesn’t — her clients hired her, not her letterhead. The practical test: if you hired a competent manager and stepped back from daily operations for a year, would your revenue hold? If yes, you likely have transferable goodwill. If your clients would start calling you at home, the picture is more complicated. This distinction matters for buyers evaluating asking prices, for divorcing spouses dividing marital assets, and for estate planners establishing value. For a deeper look: redacted