Goodwill Assessment Checklist for Buying a Business in Australia
A goodwill assessment checklist for buying a business in Australia helps you verify — before you sign anything — whether the goodwill you're paying for will still exist once the current owner leaves. In most small business sales, goodwill accounts for 60% to 90% of the purchase price. That's a significant bet on something intangible.
The problem is that goodwill claims are easy to make and hard to disprove from a desk. A seller with a good broker will present their goodwill as defensible, recurring, and firmly attached to the business. Your job as a buyer is to test those claims with evidence, not take them at face value.
This checklist gives you a structured way to do that — whether you're looking at a plumbing business in Brisbane, a cleaning company in Melbourne, or a landscaping operation on the outskirts of Perth.
Why Most Buyers Don't Verify Goodwill Properly
Most due diligence checklists cover financials, legal, employees, and contracts. Goodwill — the most expensive line item in the deal — often gets a line or two.
The reason is partly psychological: by the time a buyer reaches due diligence, they've usually already decided they want the business. Challenging the goodwill feels like looking for reasons not to proceed. A good broker knows this and is not above exploiting it.
The other reason is that goodwill verification requires talking to customers, which many buyers feel uncomfortable doing mid-process. It can feel presumptuous. It isn't. It's exactly what you should be doing.
I've seen buyers discover — after settlement — that the "loyal customer base" had loyalty to the owner specifically. One deal in the trades sector involved a small electrical contractor where the commercial clients (who made up 65% of revenue) had never interacted with anyone other than the owner. After the owner left, two of the three commercial accounts went to a competitor within 90 days. The buyer paid a 2.8x multiple for earnings that evaporated. The checklist below is designed to catch exactly that kind of situation.
The Critical Distinction: Personal vs Commercial Goodwill
Before using the checklist, understand the framework behind it. There are two types of goodwill in any business sale:
Commercial goodwill attaches to the business entity — the trading name, the systems, the location, the online reputation, the customer contracts, the trained staff. It transfers with the sale and continues generating revenue for the new owner.
Personal goodwill attaches to the individual owner — their industry relationships, their personal reputation in the local area, their specific technical skills or licence, their direct relationship with key clients. When the owner leaves, it leaves too.
The full breakdown of how this affects what you should pay is covered in the article on how to value goodwill when buying a small business. The short version: you should only pay full multiple for commercial goodwill. Personal goodwill — if you're paying for it at all — warrants a significant discount or a structured earn-out.
What the Checklist Covers
The full checklist (below the gate) is structured across four phases:
Phase 1: Customer Relationship Verification — confirming that clients are loyal to the business, not the owner.
Phase 2: Revenue Quality Assessment — checking that the earnings you're paying a multiple on are real, recurring, and not at risk.
Phase 3: Systems and Transferability — verifying that processes, staff, and operations can run without the current owner present.
Phase 4: Seller Claims Stress-Test — a direct challenge to the specific goodwill claims made in the information memorandum or seller conversations.
If you're also working through the overall valuation process, pair this with the EBITDA Normalisation Checklist and the Offer Price Calculation Framework. Accurate goodwill assessment is only useful if the earnings figure underneath it is also correct.
This is part of Module 4 (Valuation & Pricing) of the Acquisition Playbook.
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