The important methods of valuation of goodwill are: Average Profits Method, Super Profits Method, and Capitalisation Method.

Average Profits Method: Under this method, goodwill is valued at agreed number of 'years' purchase of the average profits of the past few years. It is based on the assumption that a new business will not be able to earn any profits during the first few years of its operations. Hence, the person who purchases a running business must pay in the form of goodwill a sum which is equal to the profits he is likely to receive for the first few years. The goodwill is calculated by multiplying the past average profits by the number of years during which the anticipated profits are expected to accrue.

Super Profits Method: Goodwill exists only when the firm earns super profits. Goodwill can be defined as "the present value of a firm's anticipated excess earnings" or as "the capitalised value attached to the differential profit capacity of a business". Any firm that earns normal profits or is incurring losses has no goodwill.

Capitalisation Method: This is another method advocated for the valuation of goodwill of a partnership firm.

Since goodwill is an intangible asset, it is very difficult to accurately calculate its value. Goodwill calculated by one method may differ from the goodwill calculated by another method. Hence, the method by which goodwill is to be calculated, may be specifically decided between the existing partners and the incoming partner.