Medical and dental practice valuation
Australian medical and dental practices typically value at 3.0 to 5.0 times normalised EBITDA, with the number of practitioners and the terms of their service agreements deciding how much of the goodwill actually transfers.
Healthcare sits near the top of the SME range because patient demand is durable and largely non-discretionary. The risk is concentration: a practice whose earnings depend on one clinician is valued closer to that clinician’s replacement cost than to a multiple of profit.
Quick answer
What is a medical or dental practice worth?
Normalised EBITDA — after every practitioner, including the owner, is costed at a market service fee or salary — multiplied by 3.0× to 5.0×. A multi-practitioner practice with signed associate agreements, a long lease and accreditation in place reaches the top. A solo practice where the principal generates most of the billings is valued substantially lower, because most of that goodwill is personal.
What moves the number
What separates a 3× practice from a 5× practice
The clinical quality of a practice and its value as a business are different questions. Buyers price the second one.
| Factor | Pushes toward the top | Pulls toward the bottom |
|---|---|---|
| Practitioner mix | Three or more practitioners, principal generating under 40 per cent of billings | Solo principal or a principal generating the large majority of revenue |
| Service agreements | Associates on written agreements with notice periods and restraints | Handshake arrangements, no restraint, practitioners free to leave with their lists |
| Patient base | Large active patient file, strong recall system, mixed referral sources | Reliance on one referrer, a single health fund, or a thin recall list |
| Premises | Lease with long term and options in an established catchment, or freehold | Short lease at a purpose-built site that would be costly to replicate |
| Compliance and systems | Current accreditation, clean records, modern practice software | Lapsed accreditation, paper records, equipment near end of life |
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Practitioner mix
↑ Three or more practitioners, principal generating under 40 per cent of billings
↓ Solo principal or a principal generating the large majority of revenue
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Service agreements
↑ Associates on written agreements with notice periods and restraints
↓ Handshake arrangements, no restraint, practitioners free to leave with their lists
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Patient base
↑ Large active patient file, strong recall system, mixed referral sources
↓ Reliance on one referrer, a single health fund, or a thin recall list
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Premises
↑ Lease with long term and options in an established catchment, or freehold
↓ Short lease at a purpose-built site that would be costly to replicate
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Compliance and systems
↑ Current accreditation, clean records, modern practice software
↓ Lapsed accreditation, paper records, equipment near end of life
Normalising the earnings
Normalising a practice P&L
The single largest adjustment is almost always the principal’s own clinical work. Until it is costed at market, the practice looks more profitable than it is.
How the earnings method works →- Principal clinical remuneration Costed at the market service fee percentage a replacement practitioner would command
- Spouse or family wages Practice manager and reception roles brought to a market rate
- Related-party rent Where the practice pays rent to an entity the principal controls
- Motor vehicle, travel and CPD The genuinely personal share separated from legitimate practice cost
- Equipment purchases in repairs Chairs, imaging and sterilisation capitalised rather than expensed
- One-off recruitment or legal costs Isolated, evidenced and removed from maintainable earnings
Worked example
Worked example: a three-chair dental practice
Billings are $2.1m across the principal and two associates. Reported profit is $560,000, but the principal has drawn only $120,000 while personally generating $780,000 of billings. Costed at a 40 per cent service fee, that role carries $312,000 — a $192,000 adjustment against reported profit.
Normalised EBITDA is $368,000. Both associates are on written agreements with restraints, the lease has seven years including options, and the practice is accredited — evidence for 4.2× rather than the mid-point.
$1.55m enterprise value, with chairs, imaging and sterilisation valued separately as the asset floor
Illustrative only. Every engagement is scoped to the specific business, its records and the purpose of the valuation.
What a buyer, a bank or an opposing expert will test first
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01
Who owns the patient relationship
A practice where patients book with the practice values higher than one where they book with a named clinician. Recall data shows which it is.
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02
Associate restraint clauses
An associate who can resign and open two streets away with their patient list is a live risk to the earnings being valued.
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03
Equipment age and finance
Chairs, CBCT and autoclaves are expensive and often financed. The asset schedule nets equipment value against the chattel mortgage.
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04
Bulk-billing and funding mix
Reliance on a single funding source — one health fund, one government program — is concentration risk and is priced as such.
By asking how much of it survives the principal leaving. Patients who chose the location, the hours and the practice brand represent transferable goodwill; patients who follow a named clinician do not. In a solo practice a substantial share is usually personal, which is why solo practices sell at lower multiples than the headline healthcare band suggests.
Yes. Where the principal owns the building it is valued as property, separately from the operating business, and the P&L is normalised to a market rent. Bundling the two produces a number that is useful to nobody — and Asset Valuations Group can value both within the one engagement.
It depends on the discipline and what the practice provides. Dental associates commonly sit around 35 to 45 per cent of billings; general practice service fees are usually expressed the other way, as a percentage retained by the practice. The report states the rate applied and the market evidence for it.
Yes — physiotherapy, psychology, optometry, radiology, veterinary and specialist medical practices are all valued on the same framework, with the band adjusted for referral dependence and the capital intensity of the discipline.
A valuation of the whole practice, then an assessment of the specific interest being acquired, including whether a minority discount applies under the partnership or shareholder agreement. Read the deed first — it frequently prescribes the valuation basis and overrides what either party assumes.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
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