How Dental Practices Are Actually Valued (and What Moves the Number)

Key takeaways

• Two methods, run side by side: a percentage of collections (60-75%) and a multiple of adjusted EBITDA (3.5-5.5×). Neither one alone tells the whole story.
• Adjusted EBITDA replaces the owner with a market-rate associate. It doesn't just add the owner's salary back. That's the step that keeps a valuation honest.
• Payer mix, hygiene, equipment, the lease, and how much production walks out the door with the seller are what push a practice to either end of its range.
• When the two methods disagree, that disagreement is the finding. It usually means overhead is unusual for the revenue, and it's worth understanding before you go further.

Ask three different people what a dental practice is worth and you'll get three different numbers, usually all delivered with total confidence. None of them are wrong, exactly. They're just using different math, and most of the disagreement disappears once you understand what each method is actually measuring.

Here's how I actually think about it, and how the valuation tool on this site runs the two methods that matter, side by side, so you can see where they agree and where they don't.

The two methods, run side by side#

Buyers, sellers, brokers, and lenders mostly circle around two approaches to a dental practice's value: a percentage of annual collections, and a multiple of adjusted EBITDA. Each one is quick to calculate and each one is, on its own, incomplete.

Run together, they're genuinely useful. Where they agree, you have a sanity range worth taking seriously. Where they don't, that disagreement is itself information. Neither one replaces an appraiser or a broker actually reading the books: think of this as the test you run before you spend money finding that out.

Percentage of collections: fast, and dangerously incomplete#

The simplest, most common method values a practice at somewhere between 60% and 75% of its trailing twelve months of collections. It's fast, every broker can quote it instantly, and it's also the method most likely to get a buyer in trouble.

The reason is right there in the math: it never asks whether the practice makes money. Practices are often priced this way regardless of actual profitability, and I've seen plenty of practices collecting seven figures a year that were just breaking even after overhead and debt service. A collections-based number tells you what the revenue is worth to someone. It says nothing about whether that revenue converts into cash you can actually take home.

The EBITDA multiple: what you are actually buying#

The second method values a practice at 3.5 to 5.5 times its adjusted EBITDA: earnings before interest, taxes, depreciation, and amortization, adjusted for a private practice's realities.

"Adjusted" is doing real work in that sentence. The correct adjustment doesn't just add the owner's full compensation back into earnings. It replaces the owner-dentist with what it would actually cost to hire an associate to produce that same dentistry, because that's what a buyer is really purchasing: the earnings that survive once someone has to get paid to sit in that chair. Skip that step and your adjusted EBITDA, and every multiple built on it, comes out too high.

This is the method that rewards real profitability instead of raw revenue, which is why it usually tells a truer story than collections alone, and why the gap between the two methods is worth paying attention to. It's also why every dollar of unnecessary expense a seller cuts before listing is worth several times that in sale price: each one flows straight into the EBITDA this multiple is built on.

Two methods, one practice#

Here's what that looks like on an actual set of numbers, using the calculator's own default inputs: a practice collecting $1.1 million a year, running 58% overhead excluding all doctor pay, with a 28% cost to replace the owner clinically.

Method	How it's calculated	Range on this practice
Percentage of collections	60-75% × $1,100,000	$660,000 - $825,000
EBITDA multiple	3.5-5.5× × adjusted EBITDA of $154,000	$539,000 - $847,000

Illustrative, using the calculator's own defaults: $1.1M collections, 58% overhead, 28% to replace the owner clinically. The two methods agree between $660,000 and $825,000.

In this example, the two methods actually agree over a wide stretch: the percentage-of-collections range sits entirely inside the EBITDA-multiple range. That overlap, $660,000 to $825,000, is the neighborhood where both the revenue-based math and the profit-based math point to the same answer. The full combined range, from the low end of either method to the high end of either method, runs $539,000 to $847,000.

One more case worth naming: if overhead plus the cost of replacing you clinically already eats 100% of collections, neither method returns a meaningful number. You'd be buying a job and a lease, not a business, and that finding matters more than any multiple.

What pushes a practice to the top or bottom of the range#

The two methods above give you a range. What moves a specific practice up or down inside that range comes down to a handful of things I actually look at, in my experience:

• Payer mix and the fee schedule. A practice with strong reimbursement and room to negotiate its contracts is worth more than one locked into low fees across the board.
• Hygiene. A strong, consistent hygiene program is the engine that protects future revenue. A weak one means the number you're valuing today has a shorter shelf life.
• Equipment age and condition. Modern equipment is worth something; a practice that needs a new pano and new handpieces the week after closing is quietly worth less than its P&L suggests.
• The lease. Facility cost above roughly 7% of collections is worth watching, and above 10% is a real drag on what you can actually take home. That pressure belongs in how you weigh the range, not just in the overhead line.
• Transferability of the goodwill. How much of production walks out the door with the seller? A practice built entirely around one dentist's personal following is a different purchase than one with systems, an associate, and a team the patients trust independent of any single doctor.
• Whether the seller is staying on. A seller who's willing to stay through a real transition, even part time, helps production and patients actually transfer. One who wants to disappear the day after closing is asking you to take on more risk for the same price.

A practice strong across most of these earns the top of its range. A practice weak on several of them, even with respectable collections, belongs closer to the bottom, whatever the seller's asking price assumes.

When the two methods don't agree#

Sometimes the ranges from the two methods barely overlap, or don't overlap at all. That's not a bug in the math. It's the finding.

When percentage-of-collections and EBITDA-multiple pull apart, it almost always means overhead is unusual for the revenue. A practice with unusually low overhead for its collections will price higher on the EBITDA method than the collections method suggests, which can be a genuinely great sign. A practice with bloated overhead for its size will do the opposite: the EBITDA method drags the range down even though the top-line collections look fine. Either way, that's worth understanding on its own terms rather than splitting the difference and averaging it away.

Using the range against an asking price#

Once you have a range, the real question is simple: where does the asking price land against it?

• Above the top of the range. That doesn't automatically make the price wrong, but the seller needs to give you a reason you can name: a lease that acts as its own marketing, an exceptional hygiene program, real growth already in the books. Not a story about potential.
• Below the bottom of the range. That could be good news, or it could be a sign that the numbers you were handed aren't the real ones. Find out which before you get excited.
• Inside the range. It passes the sanity check. That doesn't mean it's fair (that's what the rest of your diligence is for), but it means the price isn't disconnected from what the practice's own numbers support.

Before you write a number down#

1. Run the practice's real, normalized collections and adjusted EBITDA through both methods.
2. Note where they agree and where they don't: a disagreement is a question to answer, not a number to average.
3. Weigh payer mix, hygiene, equipment, the lease, goodwill transferability, and the seller's transition role to place the practice inside its range.
4. Check the asking price against the combined range, and ask the seller for a specific reason for anything materially above it.

This is a sanity check, not an appraisal. Real pricing turns on the lease, the hygiene mix, patient attrition, equipment age, the fee schedule, staff who will stay, and how much of production walks out the door with the seller: the same things a broker or an appraiser will dig into properly. Use this to decide whether a deal is worth that diligence, then go back through the documents that support it before you pay someone to do the diligence itself. For the rest of the sequence (the checklist, reading the P&L, and what comes after) the acquisitions and transitions hub has it.