SUPERPROFIT

Superprofit is an extra advantage that a business enjoys over an otherwise comparable business because of the site or location. It has value as the intending purchaser will pay extra for this business advantage. Superprofits generally arise out of a monopolistic situation.

EXAMPLE

A newsagent in a regional shopping centre enjoys an extra profit compared to an otherwise comparable newsagent in a "strip" shopping centre. The extra profit arises from "sole trader" clause found in shopping centre leases. That is, a clause which excludes any competition in the subject business in that centre. However, the valuer should ascertain whether or not the shopping centre is taking part of that goodwill by way of a higher rent.

Superprofit and site goodwill also arises from a business with a long lease residue term subject to a rent well below market rent. The superprofit is the present the profit rent enjoyed by the tenant.