What's Your Practice Worth? It Depends on Who's Buying.
The same practice can sell for $720K or $4M depending on the buyer. EBITDA multiples range from 1.8x to 12x. Here's why.
Ask three people what your practice is worth and you'll get three wildly different numbers. That's because dental practice valuation isn't one formula - it depends almost entirely on who's buying.
The Three Valuation Methods
1. Percentage of Collections. The old-school method. Practices sell for 60-80% of annual collections. A practice collecting $1M might sell for $600K-$800K. This method is simple but crude - it doesn't account for profitability.
2. EBITDA Multiples. The modern standard. EBITDA (earnings before interest, taxes, depreciation, and amortization) represents your practice's true cash flow. Multiply EBITDA by a factor, and that's your valuation. The multiple depends on who's buying.
3. Discounted Cash Flow. Projects future earnings and discounts them to present value. Used mainly by sophisticated buyers and PE firms. You'll rarely see this in a solo practice sale.
Why the Range Is So Wide: 1.8x to 12x EBITDA
Here's where it gets interesting. The buyer type determines the multiple:
| Buyer Type | Typical EBITDA Multiple | Why |
|---|---|---|
| Individual dentist (solo buyer) | 1.8x-2.7x | Limited capital, SBA financing caps, buying a job |
| DSO add-on acquisition | 5x-8x | Adding to existing platform, operational synergies |
| DSO platform acquisition | 9x-11x | Building a platform for PE exit, paying for market position |
| Top-tier/premium practice | 8x-12x | Exceptional metrics, strong growth, strategic location |
The same practice with $400K EBITDA could sell for $720K to an individual dentist or $4M to a DSO looking for an add-on. Same practice, same numbers, 5x price difference based on the buyer.
34% Plan to Retire Within 6 Years
Here's the ticking clock: 34% of practice owners plan to retire within 6 years. That means a flood of practices will hit the market in the next 3-5 years. If you're planning to sell, the clock is working against you - more supply means lower multiples for average practices.
The practices that will command premium valuations are the ones that start preparing now.
Sources: VMG Health, FOCUS Bankers, ADA Health Policy Institute, LEK Consulting
