Another goodwill calculation method is by comparing the revenue of yourpractice to the average salary of another physician in the same fieldwith a comparable background. When you subtract the numbers, you thendivide the result by 20%, a percentage referred to as a capitalizationrate. The final number gives you a dollar value for your practice’sgoodwill.

Remember the value of your goodwill will also depend on factors such ashow long your practice has been in business, how many patients youhave, and how strong your relationship is with other medical facilitiesand vendors in the area.

The Bottom Line

When the time comes to assess your medical practice’s value, you will be in amuch better position if you already have a figure in mind than if youhave never given the subject a second thought. If you are presentedwith an estimate far below what you think is fair based on yourcalculations, then you need to ask for a second appraisal or hire yourown appraiser. After all, you have worked too hard building yourpractice not to earn what it is truly worth. Keep in mind that if youdo work with an appraiser, he or she needs to calculate the value ofyour practice’s goodwill when determining its total valuation. 

Resources for this article include:

“Appraising a Practice” by David Marcinko

“How to Value Your Practice” by Robert Lowes

“Valuation of Medical Practices” by Mark Master

“Valuation of Medical Practices” by Charles F. Kaiser and Amy Henchey

 

About the Author

Amy Jorgensen is a freelance writer based in southern Indiana. Herarticles have appeared in a variety of publications, including Southern California Physician magazine.

The author has no financial relationship to any of the companies listed in the article.

Topics #goodwill #medical practice value #physician practice #valuation