There are numerous approaches, formulas and rules of thumb to determine the practice’s goodwill value. One method is called the comparable sales method.

It determines the goodwill value by comparing the practice to other (comparable) practices and adjusting (up or down) the goodwill value based on differences between the practices (e.g., profitability and location). Comparable sales usually means looking at other practice sales located relatively close to the practice being valued. However, such comparables are rarely available nearby.  Professional goodwill registries use a comparable sales methodology to allow a practice to determine the worth of its goodwill, and are also invaluable as a reality check on the result of formula valuations, such as capitalized earnings and discounted cash flow.