Private Practice Valuation

Input the annual collections (Revenue) and Adjusted EBITDA (profit margin) of the practice. The calculator applies standard industry multiples to determine a rough Enterprise Value.

Adjusted EBITDA includes the net profit plus any "owner add-backs" like personal car leases or excess salary above fair market value paid to the owning physicians.

Whether you are a senior physician looking to sell your life's work to private equity (PE), or a junior physician looking to buy out a retiring partner, knowing the fair market value of the practice is the starting point for negotiation.

Many doctors erroneously believe their practice is worth 1x to 1.5x of annual revenue. In reality, buyers purchase cash flow (EBITDA). A high-revenue practice with massive overhead and small profit margins is worth far less than a smaller, highly efficient practice.

Valuation: Adjusted EBITDA × Multiple (e.g., 3.5x to 5.5x).

The "Multiple" expands based on the size of the practice and the buyer. A solo doc selling to another doctor might get a 3x multiple. A 15-doctor mega-group selling to Private Equity might command an 8x to 12x multiple.

• Pearl: If a hospital or PE firm buys your practice, they usually require the selling docs to stay on as employees for 3-5 years to guarantee revenue doesn't plummet post-sale.
• Pitfall: Overlooking the "Fair Market Value" replacement doc. If a solo owner takes home $500k, but paying a new doctor to do that exact same work costs $400k, the true EBITDA profit of the business is only $100k, not $500k.
• Pearl: Never attempt a practice sale without specialized healthcare M&A attorneys and accountants. The legal structure of the sale (asset purchase vs. stock purchase) has massive tax implications.