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FS-Evaluating Goodwill In Asset Mix Hard For Small Business
Jan L. Warner & Jan Collins

Question: For lack of a better phrase, I am “ticked off.” I am a 43-year-old man who gave up a career as a nurse to help my wife through medical school. She is a board certified internist. I raised our three children while she was never home, not only while she was in school, but also through her internship and residency. She has a real “attitude” and has not been able to get along with two of the firms that hired her, which resulted in her going out on her own as a “solo.” This is how she has practiced for three years. She only has a bookkeeper and a physician’s assistant working with her.

She works all the time, and makes good money, but as far as family life, she has forgotten it. When I learned that she was seeing the chief of staff of the hospital where she practices, I had enough. I hired a lawyer, brought a divorce suit, and asked for the kids (which she happily gave up) plus alimony and child support (which the court gave me). I also requested property division and attorney’s fees.

My lawyer suggested that we hire an expert to value the “goodwill” in my wife’s practice, which was estimated to be nearly $600,000 in excess assets to be divided. This guy cost me $15,000.

My wife’s expert said there was no good will.
Ultimately, the judge gave me a 50-50 division of the “hard assets” like the house, bank accounts, cars, her retirement, etc., but he didn’t buy the “good will” argument my lawyer made. My lawyer suggests we appeal this, but I have so much bad will toward my ex -- and now toward my lawyer, too -- that I don’t know if I have the stomach to do it. I hope you can give me some unbiased advice.

Answer: While the ultimate and final decision is yours, there are a couple of things that you probably should have asked about “goodwill” before you hired your expert.

As a sole practitioner, it would appear to us that the value of your wife’s “goodwill” in her practice is non-existent. Your ex admittedly is a driven, hardworking sole practitioner. She is responsible not only for acquiring patients, but, with the small staff she has, she also has to be responsible for managing the office, etc. These types of labors could not be sold if her practice was sold because few physicians work in this fashion.

In truth, based on the facts you present about your wife, her driven nature is not salable and can’t be valued other than by the income she produces, from which your assets were acquired and from which you are being paid child support. In other words, the “goodwill” here is personal to your wife and the way she does things. You can’t replicate it, can it, or sell it. Without her work ethic, reputation for being a good doctor, and relationships with patients, there is no value.

Since these attributes are personal to your wife and will presumably be with her the rest of her life - whether she is married to you or not - it is relatively obvious that you would have no claim now to what she may earn in the future.
Based on the facts you provided, we think you spent $15,000 unnecessarily, but we don’t know the law of your state and would not presume to second-guess your attorney.

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