Beyond EBITDA – how to make your dental practice more valuable, for you today and for others tomorrow

In recent years valuing dental practices based upon multiples of EBITDA has become the norm, and thank goodness for that. EBITDA is easier for vendors, purchasers and lenders to understand. What is it, well if you’re reading this then you probably know already. If you’re not sure, then in its simplest terms, think of it as a way of understanding the trading profit of a business (the Earnings Before…) the things that a former or subsequent owner may each account for differently or be of differing amounts (the Interest or Tax they pay and the paper adjustments for reductions in the value of tangible and intangible assets; Depreciation and Amortisation). EBITDA allows us to compare like with like, or so the theory goes.

The problem with EBITDA is the fact that even with the most nerdy definition and calculation imaginable, valuing anything will always have an element of subjectivity. Different parties have different interests for example. I would hope that your bank manager will look at the numbers rationally, and your solicitor has a non subjective opinion when assessing tenure and ownership, but do any of these things make a dental practice more or less desirable?

Do the subjective opinions of both the purchaser and the vendor affect the price and what are the other factors that make one dental practice more saleable than another?

Now you may neither be thinking of buying or selling a dental practice right now but either way, if you know what to really look out for when looking beyond EBITDA then you know what makes a dental practice tick. If you know what makes a dental practice tick, then that is useful for you wherever you are on your potential sale or acquisition timeline. As Andy Acton of Frank Taylor Associates said to me recently “EBITDA just reflects what’s going on inside a dental practice. Everything will sell for the right price, when you look beyond EBITDA you discover how to make a dental practice more saleable.”

We would like to share with you what has been going on inside the dental practices that have been the most saleable and we are hosting a Zoom conversation with Andy Acton next month. There are limited numbers and you can join us by registering from this link.

Wednesday 11th August 19:30 – 20:30

….if you can’t wait until 11th August, then have an hour on your business, on Zoom and on us. Just book a time that suits you here. Virtual tea and biscuits provided.

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