Understanding your medical practice valuation is the first and most critical step in the selling process. Whether you're planning to exit in 6 months or 6 years, knowing your number puts you in control of your future.
Quick Reference
Medical practices typically sell for 3-9x EBITDA, with specialty and PE/MSO demand being the largest drivers of multiple variation.
How Medical Practice Valuation Works
Most buyers value medical practices using one of two primary methods:
1. EBITDA Multiple Method (Most Common)
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) represents your practice's true cash flow. Buyers apply a "multiple" to this number based on specialty, size, and growth potential.
Example: A practice with $500,000 EBITDA at a 5x multiple = $2.5 million valuation
2. Revenue Multiple Method
Sometimes used for smaller practices or those with unusual expense structures. Typically ranges from 0.5x to 1.5x annual revenue.
Typical EBITDA Multiples by Specialty
| Specialty | Typical Multiple Range | PE/MSO Interest |
|---|---|---|
| Dermatology | 6-10x | Very High |
| Ophthalmology | 5-8x | High |
| Gastroenterology | 5-8x | High |
| Orthopedics | 4-7x | Moderate-High |
| Cardiology | 4-7x | Moderate |
| Primary Care | 3-5x | Moderate |
| Pain Management | 4-6x | Moderate |
Key Factors That Increase Your Valuation
- Strong EBITDA margins: 20%+ operating margins signal efficiency
- Low physician dependency: Multiple providers reduce key-man risk
- Diversified payer mix: Not overly reliant on one insurance carrier
- Loyal patient base: High retention and referral rates
- Modern technology: Updated EHR, equipment, and facilities
- Growth trajectory: Upward revenue trend over 3+ years
- Clean financials: Well-documented with minimal "add-backs"
Factors That Decrease Your Valuation
- Owner dependency: If revenue walks out the door with you
- Declining volume: Shrinking patient base raises red flags
- Old equipment: Capex needs get deducted from price
- Lease issues: Short-term or unfavorable lease terms
- Compliance concerns: Any Stark, AKS, or billing irregularities
- Staff turnover: High churn signals culture problems
Request Your Confidential Valuation Estimate
Our calculator uses specialty-specific multiples and your key metrics to provide an instant estimate.
Calculate My Practice ValueWhen to Get a Formal Appraisal
While our confidential calculator gives a solid estimate, you'll want a formal third-party appraisal when:
- You're seriously negotiating with buyers
- You need documentation for financing or legal purposes
- You're undergoing a partnership buyout
- Tax or estate planning requires certified valuation
Common Valuation Mistakes to Avoid
- Overestimating add-backs: Buyers discount aggressive adjustments
- Ignoring working capital: You'll need to normalize this at close
- Not understanding your buyer: PE vs. individual physician = different multiples
- Waiting until burnout: Valuations drop when you're checked out
Next Steps
Once you understand your value, you're ready to explore your options:
- Selling to Private Equity – Highest multiples, requires rollover
- How to Sell a Medical Practice – Complete process guide
- Request Your Confidential Valuation – Start with your number