ORION REAL ESTATE
630 First Street South
Waite Park, MN 56387
320.251.1177

QUESTION:  I have owned a profitable business for 10 years and would like to know if the business has a value over and above the asset value?
   
ANSWER:  If you have a business which has been operating profitably for a long period of time and has good financial records to substantiate the income and expenses, your business probably has “blue sky” or goodwill value.  Blue sky or goodwill is the premium paid by a buyer in expectation of profits in excess of a fair return on invested capital.  Simply said, it is a premium paid over the book value of the company.  A buyer will pay a premium for a business if the business generates excess profits.  If the business simply generates a working wage, it probably doesn’t warrant any goodwill value.  We recently sold a business for $1.6 million that had tangible assets of approximately $30,000.  This business was exceptionally profitable and warranted a tremendous amount of goodwill.  Determining goodwill or “blue sky” value should be undertaken by an experienced business broker and an accountant. 

If you have questions about buying or selling a business or other commercial real estate, please don’t hesitate to contact us at any time. 

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