Valuing goodwill and rebranding

When it comes to dissolving a long-term business partnership, you may need to consider areas such as valuing goodwill and rebranding.

When setting up a partnership, it is wise to not just enter into an informal one but to come to a clear agreement, and this includes covering what might happen in the event of the partnership coming to an end. To minimise disputes, ensure that the following are made clear when forming a business partnership:

  • when the partnership starts and how long it will last
  • who the partners are
  • how partners can leave
  • if a partner leaves, what happens to his/her capital

Follow the law

If you do not have an agreement laying out what should happen if the partnership were to dissolve, you are obliged to follow the law as set out in the Partnership Act 1890.

“It’s an old piece of legislation, but it is still the law. The Partnership Act states that if you havenÂ’t agreed how long a partnership is going to be in writing, then you can dissolve it on notice,” explains Graeme Jump, a managing partner specialising in partnership law at solicitors Mace and Jones.

Putting a price on goodwill

As Jump explains, goodwill is the difference between the value of tangible assets and the price someone may pay for the business. But it can be incredibly hard to put a value on it – and more so if the business is at an end.

“If you are dissolving a partnership, you value the goodwill in much the same way as you would in an ongoing business. But if the business is at an end, the goodwill may be less than in an ongoing one. It can be depressed as the partners are going their separate ways,” he continues.

To help ascertain the worth, look at the physical assets attached to goodwill. For example, consider who is likely to pay money to use the name, who is likely to want your customer lists – even telephone numbers can be important, particularly for small businesses, where personal contacts can be valued higher than in a bigger business.

“Goodwill can be a very mercurial thing – it can be worth a lot, or worth nothing, so there is great difficulty in valuing it,” affirms Jump.

Rebranding the business

You may choose to rebrand the business, but Jump says you are perfectly entitled to use the same name, as goodwill is attached to it. But as a precautionary measure, make sure you have the right to use it.

Alastair Campbell, founder of The Ideal Marketing Company, which offers marketing and PR for small businesses, recommends the following:

“Do not go for anything too trendy. Trends come and go but the core values of your company shouldn’t. Decide what your company stands for, such as quality, traditional values or old-fashioned service. Decide how you want to be seen by customers (such as dependable and reliable) and then decide how to reflect that in your branding.”

He also believes you should spend time deciding what you want your message to be and if you are using a design company, be sure to give a thorough briefing covering what you want to achieve.

“Don’t accept something because they give it a fancy name or make it sound impressive. At the end of the day, you are the one who is going to have to live with it day in day out for ten years or more,” warns Campbell.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Business Partnerships

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