Need an official definition of ‘personal goodwill’? It doesn’t exist.

BVWireIssue #174-3
March 15, 2017

During a recent webinar on the double-dip phenomenon in a valuation for divorce, the point was made that there is no generally accepted definition for the term “personal goodwill.” An audience member asked: “How can that be? It can be such an important issue.” One of the speakers, Rob Levis (Levis Consulting), pointed out that it does not show up in the International Glossary of Business Valuation Terms. “You can find goodwill, but not personal goodwill,” he noted. It’s also not in the glossary from the International Valuation Standards Council.

Levis pointed out that there is an entire chapter devoted to the search for a definition of personal goodwill in BVR's Guide to Personal v. Enterprise Goodwill, 5th edition. The chapter’s author, David Wood (Wood Forensic/Valuation Services), famous for his MUM framework for estimating personal goodwill, offers his definition, which sounds good to us:

Personal goodwill is the value of earnings or cash flow attributable to attributes of the individual that results in earnings from consumers that return because of the individual, in earnings from new customers who seek out the individual, and in earnings from referrals made to the individual.

Do you know of a good definition of personal goodwill? Let us know!

Please let us know if you have any comments about this article or enhancements you would like to see.