What Is a Good EBITDA Margin for a Dental Practice?
Ask three brokers what a good EBITDA margin is and you'll get three answers, because most of them are quoting numbers before owner compensation is normalized. Here's the version that holds up in an actual deal.
The benchmark bands
For a general practice collecting $800K to $1.5M, a true EBITDA margin of 15-25% is solid. Under 12% and buyers start discounting. Over 28% is rare and usually means the owner is underpaying themselves on paper.
Specialty practices run higher. Oral surgery and endo often hit 30-40% because chair time is worth more and overhead doesn't scale with production the same way.
Why owner comp is where deals fall apart
True EBITDA subtracts fair-market compensation for the dentistry you personally produce. If you'd have to pay an associate $250K to replace your production, that $250K comes out before the margin is calculated.
A practice collecting $1M with $400K of "profit" isn't running a 40% margin. If replacement comp for the owner's production is $250K, true EBITDA is $150K and the margin is 15%. That's the number a DSO applies a multiple to, not the $400K.
Quick math on your own P&L
Start with collections. Subtract all operating expenses except interest, taxes, depreciation, and amortization. Then subtract 28-32% of your personal production as replacement comp. Divide what's left by collections.
Add back genuine one-time costs (a legal dispute, a one-off equipment repair) and personal expenses run through the practice. Buyers will check every add-back, so keep it defensible.
How to move the margin
The levers, in order of impact: staff costs above 28% of collections, PPO write-offs eating your fee schedule, and supplies drifting past 6%. Fixing hygiene department profitability usually moves the margin 2-4 points on its own.
If you're within a few years of selling, margin improvement is worth more than growth. At a 6x multiple, every $10K of recurring EBITDA you add is $60K of enterprise value.
Related reading: when to sell to a DSO, how DSO earnouts are structured, and the acquisition due diligence checklist.
