Many brokers today would still value both of these businesses at 80% of collections, but when looking at each value as a multiple of EBITDA, it becomes readily apparent that Practice A is much more expensive than Practice B. EBITDA. Method 3 evaluates practice No. A bit of a mouthful, but the point to note is it is an adjusted net profit figure that dental business valuers use to assess the value of the goodwill element of your dental … This valuation method is commonly used by private equity companies. The two most common methods for valuing a dental practice dental practice for sale are to use a multiple of collections or a formula relying on your earnings before interest, tax, depreciation, and amortization (EBITDA). As of December 2018, there are approximately 174,290 dental practices in the United States. We’ll discuss each in turn and then discuss why these numbers will … Valuing a Dental Practice. The projected cash flows are based on a reasonable growth rate of collections and associated practice costs each year and then Discounted Cash Flows Method – this dental practice valuation method projects 10 years of net income (EBITDA) and then calculates the net present value of that income. In the simplest terms, a dental practice valuation is a determination of value. Dental groups with an EBITDA in excess of £1.5m can be sold at higher multiples, but we are rarely seeing independent single sites selling above x7 EBITDA. This valuation method projects 10 years of net income (EBITDA) and then calculates the net present value of that income. More importantly, a practice valuation provides dentists, specialists, associates, and other parties with a starting point for putting a dental practice on the market, considering the purchase of a practice, negotiating a fair price, and guiding the tax and estate planning processes. The report can be a Comprehensive Report—usually from 50 to 70 pages of information that includes supporting documentation or a Limited Report, usually from 2 to 4 pages plus supporting documentation. The purpose of the above example is to highlight the impact on practice values when adjustments aren’t made in the calculation of EBITDA in relation to the value of work performed by practice principals. Best way to maximise the sale value At Samera, we feel the best way to maximise the sale value is by having a competitive sale process and approaching the market with the true value . EBITDA stands for Earnings Before Interest, Taxes, and Depreciation Amortization. Dental practices are among the most profitable businesses, with an average profit margin of 25.0%. V = EBITDA (j) ÷ r. V = Value of the dental practice; EBITDA = Operating income before interest, taxes, depreciation, and amortization; j = Date of the valuation (2014) r = Cost of capital of the "public/private equity" sector at 9.46% as of January 2014. The projected cash flows are based on a reasonable growth rate of collections and associated practice costs each Practice B provides the owner 7.7x ($385,000/$50,000 = 7.7x) more cash flow than practice A, hands down. A Formal Dental Practice Valuation. Dental clinic valuations are almost always a product of the earnings before interest, taxes, depreciation and amortization (EBITDA) of the practice. You may have been referred to ‘EBITDA’ or to give it its full name ‘Earnings Before Interest Taxation Depreciation and Amortisation’. Yet, when the dental practice valuation is complete, what the buying dentist is really buying is the good will. Using this basis the practice pre tax net profit would be reduced to £60,000, EBITDA of £80,000, and goodwill value of £400,000. As a dental platform’s number of facilities expands, not only will the valuation increase due to the additional EBITDA, but it will also likely raise the multiple applied to that EBITDA. Jan 14, 2019 | Business Valuation, Dental Practice, Small Business. 5 as $6 million x 12% = $720,000 ÷ 9.46% = $7.6 million. A dental practice appraisal includes all the relevant information and provides a formal written report.