The Practice Buyer's Corner - Random Musings from the Buy-Side

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.

Blog By:
seanepp

Most folks want to rush to The Great Multiple Discussion.  What factors should I apply to which income statement items to figure out the value of my practice?  

Far fewer people spend time discussing what they’re actually multiplying - i.e. revenue, SDE, EBITDA, free cash flow, etc.

Moreover, is the amount you’re attempting to multiply reflective of a performance high water mark or of a more repeatable, sustainable outcome?  

The good news is that healthy practices continue to trade hands at very strong prices.  

Lender and investor appetite is changing though, even if subtly.  Some groups have failed.  Some groups are failing.  Some groups are presently pencils down to grind through their own internal issues.  Other groups are starting anew, having yet to stub their toes in their current life cycle.

Importantly, lenders have gotten wiser at all levels.  This is largely due to the irrational exuberance that has defined much of the last decade.

An unsustainable level of EBITDA is not likely to garner the same multiple as a more realistic EBITDA view.  

Then again, there are fresh piles of inexperienced money being stacked up daily.  Caveat emptor!

Old Joke:  You define the EBITDA and I’ll set the multiple.

Good luck, have fun, don’t die!

Stay Frosty

Sean