What defines goodwill - and how will Covid-19 affect that ?
With permission, I reproduce here an email received from Andy Price at Portman Dental, in response to an earlier blog post.
Firstly, great job with your daily briefings, been a breath of fresh air and a good watch, especially when the odd bombshell goes off (open private practices now!). It’s been amazing to see the practices/owners that are preparing well and those who are not, which I see in my daily work now as well. The last 10 weeks have been the busiest for me and you too by the looks of things, during my 30 years within orthodontics.. mustn’t grumble tho..! Keep it up Chris
Secondly, a point around Goodwill (one of your questions from your morning blog)
Given that I was planning my exit before Covid-19, how much longer will I now have to work, whilst goodwill values recover?
It got me thinking to what Goodwill actually is and perhaps more importantly, how it’s perceived by practice owners/buyers etc. The definition of Goodwill is:
Every viable dental practice has goodwill. Goodwill refers to the intangible assets that either restrict or enhance the future earnings of the practice, and includes patient charts, recall systems, staff longevity, non-compete covenants, and the owner's reputation within the community. Goodwill typically accounts for 60% to 80% of the practice's total value. For both buyers and sellers, protecting the practice's goodwill is critical throughout the entire transition process.
I notice it doesn’t mention pandemics..!
Now, this may be just my perception, but most owners I speak to classify goodwill as revenue, top line only and that’s clearly not the case according to the literal definition above.
If I refer to your question, the goodwill of some practices could have increased during this time by patient interaction/support/guidance and that can do plenty to increase ones reputation/goodwill within the community…??
Perhaps I may be looking to deep into this, but if practice owners looked to separate the points out between revenue and goodwill, although intangibly linked, it may give them a different angle on things and help focus them on increasing their goodwill other than revenue alone.??
It could even give them a motivational boost in them knowing that they are indeed increasing their goodwill and it’s not all going to pot due to the revenues heading south..
Cheers for now Chris and I’m looking forward to meeting up in the future and chewing the fat sometime once this is all over, although dentistry will never be the same again.
Portman Mergers & Acquisitions Manager
el: 07799 363545