Dental-practice valuation guide

Dental Practice Valuation: What Comes Before the Number

A practice does not have one trustworthy value before the purpose, effective date, ownership interest, standard of value, records, assumptions, method, and report type are defined.

Public educational guide · CPA-reviewed October 6, 2026

Reviewed and approved bySpiro Leunes, CPAReview dateOctober 6, 2026PublisherLA Trusted Professionals · Education onlyScopeContent review of this guide · No LA Trusted Professionals status or endorsement

A percentage is not a valuation.

A collections percentage or online calculator may start a question. It cannot establish which assets and liabilities are included, normalize owner compensation, test future cash flow, account for location and payer mix, or produce a scoped professional conclusion.

Quick answer

How is a dental practice valued?

The method follows the deal. In the words of Spiro Leunes, CPA, to arrive at the proper valuation you must understand who the parties are, what type of transaction it is (an asset sale, a stock sale, or a partnership interest), and the dental practice specialty.

Sale to a private equity group: a multiple of EBITDA, after a deduction for the replacement dentist’s pay, a percentage of collections that depends on specialty and on whether the lab fee is deducted first.
Sale to another dentist: seller’s discretionary earnings (SDE), from a profit and loss statement normalized to the true economic benefit to the owner.
Sale of a partnership interest: discounts for lack of marketability and minority-interest discounts.

Before any method, define the purpose, the property, the effective date, and who will rely on the value. A collections percentage or online calculator may start a question; it is not a valuation. Read Spiro’s points in full.

The question that comes before the number

“What is my practice worth?” is incomplete. Start with why the value is needed and who will rely on it. A sale, associate buy-in, partnership change, financing request, estate plan, divorce matter, or internal planning decision can call for different assumptions, standards, dates, and reports.

PurposeSale, buy-in, financing, planning, dispute, or another named use

PropertyWhole practice, partial interest, selected assets, real estate, or another defined interest

DateThe effective date the evidence and conclusion must support

UsersOwner, buyer, lender, court, tax adviser, partner, or another named party

The ADA describes several reasons a dental practice may need valuation work and recommends defining what is being valued, when, and for which decision before relying on the result.

Define the assignment, not just the price

Ask whether the engagement will deliver a conclusion of value, a calculated value, transaction analysis, or planning support. Those are not interchangeable. The written scope should name the standard of value, effective date, ownership interest, intended use, intended users, assumptions, methods, exclusions, and report form.

What exact entity, interest, assets, and liabilities are included?
Is real estate valued separately from the operating practice?
Which ownership, marketability, control, or transaction assumptions apply?
Will the work express a conclusion, a calculation, or another limited analysis?
Which professional standard governs the work?
Who may use the report, and for what stated purpose?

Build a record that covers the same practice and periods

A credible analysis needs records that agree—or differences that can be explained. Match the legal entity, locations, providers, and date ranges before comparing tax returns, financial statements, practice-management reports, bank deposits, payroll, debt, and contracts.

Tax returns, financial statements, and current year-to-date reports
Production, collections, adjustments, accounts receivable, and payer mix
Owner and associate compensation, payroll by role, and benefit costs
Equipment lists, age and condition, leases, debt, and capital commitments
Provider schedules, patient activity, referral concentration, and location coverage
Material contracts, real-estate terms, ownership records, and transaction documents

Record every material difference by amount, period, source, explanation, and responsible person. A busy schedule does not prove collectible revenue, and a tax return does not explain every operating trend.

Compare approaches without turning one shortcut into the answer

Valuators commonly consider market, income, and asset information. The assignment determines which approaches are relevant and how they are weighted. Ask the valuator to explain the data, adjustments, and assumptions rather than accepting a multiple without its denominator and source.

Market approach

Compares relevant transactions or market evidence after testing whether the practices, dates, interests, and terms are comparable.

Income approach

Connects expected economic benefit with normalized earnings, growth, risk, capital needs, and a supported discount or capitalization rate.

Asset approach

Considers the assets and liabilities included in the assignment, including equipment and applicable intangible value.

A three-year average, collections percentage, EBITDA multiple, or calculator can miss provider dependence, future capital needs, lease risk, reimbursement mix, debt, working capital, unusual expenses, and the difference between a partial interest and the whole practice.

Who is buying, and what is being sold, changes the method

The points below come from Spiro Leunes, CPA’s review of this guide, which he approved on October 6, 2026. Each one is followed by a short explanation in plain terms from us. In his words, to arrive at the proper valuation you must understand who the parties are, what type of transaction it is (an asset sale, a stock sale, or a partnership interest), and the dental practice specialty.

Sale to a private equity group

Spiro’s point: A private equity valuation uses a multiple of EBITDA, which varies by geographic market and specialty. It has to take into account a deduction for a replacement dentist: depending on specialty, the new dentist is paid a percentage of what the owner/seller produced, which can be from 30 to 40 percent of collections. Very often the lab fee may also be deducted.

In plain terms: EBITDA is a measure of the practice’s yearly profit from operations, counted before interest, taxes, depreciation, and amortization. The buyer pays a set number of times that profit, and that number is the multiple. After the sale, whoever does the dentistry is paid a share of collections: often the selling dentist, who stays on as an employee, or a new dentist. That pay comes out of the profit before the multiple is applied, even if you stay.

Spiro’s point on the lab fee: In a case where the lab fee is deducted, the percentage of production paid will be higher. For a general dentist it may be as high as 35 percent of collection but deduct the lab fee first.

In plain terms: the lab fee is what the practice pays a dental laboratory for work such as crowns. When the lab fee is taken out of collections first, the dentist’s percentage is figured on what is left, and that percentage is higher. For a general dentist, Spiro puts it as high as 35 percent of collections, after the lab fee comes out.

Sale to another dentist

Spiro’s point: A private sale to another dentist requires the calculation of seller’s discretionary earnings. The profit and loss statement is normalized to arrive at the true economic benefit that inured to the owner.

In plain terms: seller’s discretionary earnings start with the practice’s yearly profit before taxes, then add back interest, depreciation and amortization, the owner’s own pay and benefits, and the personal or one-time costs run through the practice: what one owner-dentist really gets out of it each year. “Normalized” means the profit and loss statement is adjusted to remove one-time and personal costs, and to reset out-of-market items, like rent paid to the owner’s own building, to market rates.

Sale of a partnership interest

Spiro’s point: The sale of an interest in a partnership raises other valuation issues. There are discounts for lack of marketability, and minority-interest discounts.

In plain terms: there is no ready market for part of a private practice. Few buyers want a share of someone else’s practice, and partnership agreements often limit who can buy, so the stake is valued below its share of the whole (the discount for lack of marketability). A stake too small to control the practice’s decisions is discounted again (the minority-interest discount).

Our suggestion: ask the valuator which of these fits your deal, and how the replacement-dentist cost, lab fees, and any discounts were treated in the number you are given.

Separate practice value from purchase-price allocation

A negotiated transaction price does not answer how consideration is allocated among transferred assets. When the applicable asset-acquisition rules apply, buyer and seller reporting can involve IRS Form 8594. The allocation can affect basis, gain or loss, depreciation, amortization, and later reporting.

Ask the accountant and attorney when Form 8594 applies, which asset classes are involved, how the agreement will address allocation, and how both sides will keep their reporting consistent. Do not use this guide to choose an allocation or predict a tax result.

Put the decision rules in the engagement letter

Professional qualifications and dental-practice valuation experience
Independence, conflicts, compensation, and any transaction role
Standard of value, effective date, interest valued, intended use, and users
Information requested, management representations, and verification limits
Methods considered, material assumptions, normalizing adjustments, and exclusions
Report form, timetable, revision policy, document retention, fee, and responsible team

A CPA may perform valuation work, but the credential alone does not define the assignment. AICPA VS Section 100 applies to covered AICPA member engagements and distinguishes a conclusion of value from a calculated value. Confirm the standard and any state-board requirements for the exact professional and purpose.

Protect financial and patient information before records move

Do not send tax returns, bank statements, payroll files, patient information, client lists, credentials, or identity documents through this website or ordinary email. Confirm the exact firm, engagement, secure transfer method, access controls, subcontractors, retention period, deletion process, and any required privacy agreement first.

This guide is educational. It does not provide a valuation, tax position, legal opinion, lender decision, transaction recommendation, or assurance about MRL Advisory Group’s services or outcomes.

Original and attributed sources

Check the source before using the claim.

ADA, AICPA, and IRS links support the boundaries shown here. The MRL link is a firm-authored service description, not independent proof of work performed or results.