Goodwill Valuation Calculator

Goodwill is the value of a business above its tangible net assets — representing customer relationships, brand reputation, trained staff, systems and processes, and market position. It's often the largest component of a business sale price.

Common methods: (1) Multiple of EBITDA or net profit (typically 2–8×), (2) Revenue multiple (common for SaaS and tech), (3) Super-profits method (excess earnings above a 'normal' return on assets). Different sectors use different multiples.

Indicative 2026 UK multiples: Professional services 3–5× profit; Technology/SaaS 4–8× revenue; Dental practices 1–1.5× revenue; Pubs/restaurants 3–5× EBITDA; Accountancy firms 0.8–1× revenue; Financial advisers 2–3× recurring revenue; Retail 1–3× profit.

Yes — goodwill disposed of on business sale creates a CGT event. If the goodwill was created by the business (not purchased), the base cost is typically nil, meaning 100% of goodwill value is a taxable gain. BADR at 10% may apply.

Purchased goodwill (paid for when buying a business) has a cost base equal to what was paid — creating a smaller gain on resale. Inherent/self-generated goodwill has a nil cost base for CGT, meaning the full goodwill value is a taxable gain.

No — goodwill is not a permitted investment for SIPPs. Commercial property used by a business can be held in a SIPP (attracting tax-free rental income), but the business goodwill itself cannot.

Business goodwill may qualify for Business Property Relief (BPR) — reducing its IHT value by 50% or 100% if the business is trading (not investment). BPR requires 2+ years of ownership. Specialist IHT planning is important for business owners.

The super-profits method: (1) Calculate net business assets, (2) Apply a 'normal' return rate (10–15%), (3) Subtract this from actual profit to get 'super profit', (4) Multiply super profit by an appropriate multiplier (typically 3–5×). This method is common for professional firms.

MBO goodwill is negotiated between existing owners and management team. Value is typically based on maintainable earnings (post-MBO projected profits) at an agreed multiple. Management teams often use private equity funding with leveraged structures.

EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is the most commonly used profit measure for business valuations because it removes accounting policies and financing structure, allowing like-for-like comparison across businesses.

For business sales above £100,000, a formal valuation by a qualified business valuator (ICAEW or RICS-registered) provides credibility with buyers and HMRC. For tax purposes (BADR claims, IHT), HMRC may challenge unsupported goodwill values.

High-quality recurring revenue (subscriptions, retainers, long-term contracts) commands premium multiples. A business with 80% recurring revenue may achieve 5–7× EBITDA vs 2–3× for a project-based business with similar profits — buyers pay for predictability.