What Is Practice Valuation Multiples?
The multiplier applied to a healthcare practice's earnings or revenue to determine its market value, varying by specialty, size, and growth rate.
Practice Valuation Multiples Explained
Practice valuation multiples determine how much a healthcare practice is worth when sold. The most common approach is applying a multiple to the practice's adjusted EBITDA or seller's discretionary earnings (SDE).
Multiples vary by specialty and size. Solo dental practices typically sell at 3 to 5x SDE. Multi-location dental groups command 6 to 10x EBITDA. Medical practices range from 4 to 8x depending on specialty and payer mix. Veterinary practices have seen multiples expand from 5x to 12x+ due to PE consolidation.
Key factors that increase multiples include recurring revenue (membership plans, maintenance agreements), multiple locations, diversified payer mix (not dependent on one insurance company), strong management team (not founder-dependent), documented processes, and growth trajectory.
The DSO (Dental Service Organization) and MSO (Management Service Organization) consolidation wave has dramatically increased multiples for practices with 3+ locations. PE firms pay premium multiples for platforms that can absorb bolt-on acquisitions.
Why Practice Valuation Multiples Matters
For healthcare practice owners planning an exit, understanding valuation multiples determines whether your practice is worth $1M or $5M. Every operational improvement (AI automation, SOPs, growth systems) that increases EBITDA multiplies through at exit.
Common Mistakes
- 1
Assuming your practice will sell at the same multiple as the headline DSO acquisition in the news
- 2
Not preparing for sale 2 to 3 years in advance, which leaves money on the table
- 3
Ignoring add-backs that legitimately increase adjusted EBITDA and therefore valuation
Related Terms
EBITDA Add-Back
Expenses added back to earnings before interest, taxes, depreciation, and amortization to reflect the true recurring profitability of a business.
Private Equity (PE) Portfolio Operations
Strategic and operational support for companies within a PE firm's portfolio, focused on driving growth, improving margins, and preparing for exit.
Patient Acquisition Cost
The total cost to acquire one new patient, including advertising, staff time, and technology, critical for healthcare practice profitability.
Same-Store Sales Growth
Revenue growth at existing locations compared to the same period last year, isolating organic growth from growth driven by opening new locations.
How Attainment Helps
Industries We Serve
Frequently Asked Questions
What multiple do dental practices sell for?
Solo practices: 3 to 5x seller's discretionary earnings. Group practices (2-4 locations): 5 to 7x EBITDA. DSO-scale groups (5+ locations): 7 to 12x+ EBITDA. Size, growth rate, payer mix, and geographic market all affect the multiple.
How do I increase my practice's valuation multiple?
Expand to multiple locations (platform multiples are higher), reduce owner dependency (hire associate providers and managers), implement recurring revenue (membership plans), document all processes (SOPs), and show consistent growth. Start preparing 2 to 3 years before you plan to sell.
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