Goodwill

[Gardian]

Purely out of interest from those of you who'll know.

For 10 yrs, we've gone to the same hairdresser. Big-ish town, nice salon, we're almost part of the furniture! Same stylist, a lovely woman of 35yrs-ish.

We learned for the first time today that she bought the business 2 yrs ago. Good for her. Then we got to think about the financials.

Let's say 150k turnover p.a., nett profit (before tax) 60k-ish.

What might she have had to pay for the goodwill?

[YCCMB]

According to cession.commerce.com:

Pour l’évaluation du fonds de commerce d’un salon de coiffure, l’administration propose à  titre indicatif, un barème compris entre 65% et 130% du CA TTC.

 

Mais

ce critère peut être revu, à la hausse ou à la baisse, en fonction de

divers éléments comme le type de clientèle, l’emplacement du salon, le

potentiel de développement, l’appartenance à un réseau de franchise, la

rentabilité réelle, les travaux et les investissements à réaliser

(matériel et immatériel) et la durée du bail.

So, it's based on turnover, not net profit, and should be somewhere between 65 and 130% of that, including taxes, depending on the criteria listed in the second paragraph above.

[Gardian]

Thanks for that Betty.

My guess was totally undercalled, but I can see the logic of it. A cost of (say) €150k for the goodwill would be perfectly reasonable given the probable nett profit and perfectly fundable by a bank.

The previous owner had 3 salons and is nearing retirement age.  It was probably a deal that suited everybody.