← Back to Blog
Practice Valuation
Understanding How Dental Practices Are Valued
06/02/2025
One of the most common questions we hear from both buyers and sellers is some version of, "what's this practice actually worth?" The honest answer is that valuation isn't a single formula, it's a combination of methods and judgment calls, but understanding the main factors helps both sides set realistic expectations.
Most dental practice valuations lean on one of two approaches: a multiple of adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), or a percentage of annual collections. Adjusted EBITDA starts with the practice's profit and adds back owner-specific expenses, like above-market owner compensation or personal costs run through the business, to show what the practice would actually earn under a new owner. Collections-based valuations are simpler but less precise, since they don't account for how efficiently a practice converts revenue into profit.
Beyond the formula, several factors move the actual multiple a practice commands. Collections trends matter more than the current number, a practice growing 10% a year is worth more than a flat one at the same revenue. Provider mix matters too: production spread across multiple dentists and hygienists is less risky to a buyer than production concentrated in one departing owner. Overhead ratio, new patient flow, and the strength of recall and hygiene systems all factor in as well.
Specialty practices and general practices are often valued somewhat differently, and local market conditions, competition, demographics, and real estate costs, can shift multiples up or down within a given range.
Because so many variables are involved, we recommend both buyers and sellers work with a dental-specific CPA or valuation professional rather than relying on rules of thumb from a friend's practice sale. What a practice down the street sold for tells you very little about what yours is actually worth.
Most dental practice valuations lean on one of two approaches: a multiple of adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), or a percentage of annual collections. Adjusted EBITDA starts with the practice's profit and adds back owner-specific expenses, like above-market owner compensation or personal costs run through the business, to show what the practice would actually earn under a new owner. Collections-based valuations are simpler but less precise, since they don't account for how efficiently a practice converts revenue into profit.
Beyond the formula, several factors move the actual multiple a practice commands. Collections trends matter more than the current number, a practice growing 10% a year is worth more than a flat one at the same revenue. Provider mix matters too: production spread across multiple dentists and hygienists is less risky to a buyer than production concentrated in one departing owner. Overhead ratio, new patient flow, and the strength of recall and hygiene systems all factor in as well.
Specialty practices and general practices are often valued somewhat differently, and local market conditions, competition, demographics, and real estate costs, can shift multiples up or down within a given range.
Because so many variables are involved, we recommend both buyers and sellers work with a dental-specific CPA or valuation professional rather than relying on rules of thumb from a friend's practice sale. What a practice down the street sold for tells you very little about what yours is actually worth.
More from the Blog
