Q&A: Creating economic goodwill

April 9, 2010

Goodwill value as an economic term, measured in dollars, is completely different from sociologic goodwill that you describe.

A: Goodwill value as an economic term, measured in dollars, is completely different from the sociologic goodwill you describe. Sometimes they overlap; usually they don't. Economic, or financial, goodwill typically is the difference between a practice's sale price and its tangible assets-such as furniture, tenant improvements, instrumentation, and supplies-unless other, intangible assets also are defined. Resources for learning more about economic goodwill include my Medical Practice Valuation ( http://www.medicalpracticeappraisal.com/medical_practice_valuation_book.html); Valuation of a Medical Practice by Tinsley, Sides, and Anderson; and Valuing Small Businesses and Professional Practices by Pratt, Reilly, and Schweihs.

You can have another appraiser review your original appraiser's report and comment on it. Reasonable opinions can differ about the existence-or amount-of economic goodwill value in a practice. It's entirely possible that economic goodwill value could be created in just a year or two with a different business strategy for your practice.

Answers to our readers' questions were provided by Medical Economics consultant Keith Borglum, CHBC, of Professional Management and Marketing. He has been a licensed practice broker, appraiser, author, and management consultant to physicians for more than 25 years; is based in Santa Rosa, California; and practices nationally. Send your practice management questions to medec@advanstar.com
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