The Transition Advisor's Corner - Random Musings from the Front
The Transition Advisor's Corner - Random Musings from the Front
The purpose of this blog is to share current, real world, experiences on the topics of practice valuation, practice transition, retirement planning, and building equity value - over time - in your dental practice.
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seanepp
seanepp

Et tu, EBITDA?

Et tu, EBITDA?

8/25/2026 10:32:00 AM   |   Comments: 0   |   Views: 35
EBITDA is not created equally.  Re-read until it sticks.

In the practice valuation realm, most people rush to the “multiple” discussion without really discussing what exactly they are multiplying.  For doc-to-doc deals, revenue and Seller Discretionary Earnings (SDE) are common metrics.  Groups tend to speak in terms of EBITDA.  What is not discussed often enough is the sustainability of financial performance.  

In most practices today, one full-time equivalent dentist generates $150K-$200K of EBITDA.  This is primarily driven by their mix of services, their pace, hours worked, and, of course, insurance mix.

If a practice is suggested to be generating more EBITDA than this, it is time to start asking some questions such as:

What services are the current doctors offering?  Are any of them unique or less prevalent in similar style practices elsewhere?  Think a GP providing bracket and wire ortho, lots of extractions, or endo.  Is it reasonable to assume that a new owner could provide these services or would that be unlikely?

Is the practice open unique hours (e.g. evenings or weekends)?  Is it reasonable to assume that this holds in the event of turnover?  How do you anticipate the workforce responding to any changes?

How many truly active and new patients does the practice have?  For example, a typical GP needs > 1,500 active patients in recall, or 700-800 active patients per full-time hygienist.  Are there enough patients to share if more provider time was added to the practice?  

Each full-time GP should also be targeting > 25 new patients per month - how does this look for the subject practice?  You want to avoid carrying too much staff for the patient load.

Common themes to look out for would be relatively high production per active patient - i.e. are they pulling forward restorative care, strip mining future productivity?  Is the practice recall or new-patient centric?  Are they focused on maximum same-day dentistry at the expense of quality recall and periodontal outcomes?

What you learn should inform your view of the sustainability of the EBITDA.  

Practices with meaningfully above range EBITDA results merit enhanced due diligence.  Sometimes deal structure can help mitigate this risk.  Sometimes the risk is exactly what it is and the EBITDA must be adjusted before any multiple is applied.  Common adjustments would be to exclude certain categories of unsustainable revenue and related variable expenses (staff costs, consumables, etc.).  

Once the EBITDA has been appropriately restated, then and only then should the multiple discussion come into play.  

Good luck, have fun, don’t die!

Sean
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