When transitioning your practices, there is the valuation process. This process reviews the value of your entire practice. It's broken down between measurable and unmeasurable values. For example, equipment can have a specific dollar value, but goodwill doesn't.
Here's where it gets interesting. Goodwill is valued at 60-80% of the overall value of your practice.
What is goodwill, since it seems to be so important? Goodwill is the status a dentist/practice has in a community, reputation, patient charts, and each customer's loyalty. It's simply your relationship with those you interact with!
If goodwill is valued at up to 80% of the overall practice, then this should be an area you focus on improving and maintaining!
How can you build a good reputation in your community?
Develop Outstanding Service
Train your team to be the best of the best. Having outstanding service will create a positive reputation through word of mouth. It will also create customer satisfaction and loyalty.
Connect With Your Community
Interacting at events, throwing events, or volunteering will boost connection. Letting your community know you're invested in them will entice them to invest back into your practice.
Make It Personal
Take time as a team to get to know each patient and try to remember details about each one. You want to become their dentist and their dental practice...not just another office.
Don't Forget Your Patients
Reaching out and following up should be part of your sales and marketing strategies. Maintaining a connection with patients will help you continue to build goodwill as well as keep them maintain and even improve patient retention.
Goodwill Starts Internally
Lastly, how you interact with your patients should be a reflection of how you interact with your team. Your dental office culture should be flourishing before you endeavor to build goodwill with your community. Team nights, encouragement, willingness to help each other, and intentionality in everything are ways you can build goodwill within your team.
When your team is happy and enjoys what they do, it's easier to create goodwill with each patient!
Now it's time to sell your practice. How do you transition your goodwill effectively and purposefully? You'll want to not mention the sale to your staff or patients until all the paperwork is signed. This shouldn't be looked at as being dishonest. It's important patients and staff feel secure and looked after. Not knowing if your dentist will be around or not doesn't create a secure environment.
After a sale is completed, introducing a new doctor that you approve of and are excited about into the practice can be a positive experience for staff and employees. A written postcard or email endorsing the new doctor is an easy way to transition your patients. The current Doctor may also agree to stay on in the practice for a designated amount of time to help ease the practice into new ownership.
If you are now on the buying side coming into a new practice. How will you retain the goodwill that's already been built?
Ask the current doctor questions about their team and patients. Be specific with these questions:
- What form of communication works best?
- What are some main interests?
- How can I lead well and receive a positive response?
- What's worked for them in the past?
Be intentional about getting to know your new patients and team!
Valuing Your Practice
We started this blog talking about valuing your practice, so let's finish on this note. Financially, how does goodwill affect the valuation of a practice?
As a buyer, you cannot duplicate relationships or insure them. You can buy all the equipment and hire new staff, but if there are no customer relationships, it won't make a difference. This can feel risky.
Goodwill is cash flow! You are paying to have continued cash flow in your new practice. This is why there's such a high value on a number that is not guaranteed.
There are 5 industry methods to calculate goodwill. See this article by Dentistry iQ to review each of them.
A good reputation is something money can buy. That's right, you can buy goodwill! It has a value and can have a dollar sign put on it. To maintain or make it worth buying, you must build its value. Building the goodwill of your practice also builds value and profit whether you plan to stay with your practice or sell it in the future.