Key Takeaways
- The market approach values a dental practice by comparing it to similar sales, applying a multiple to collections, SDE, or EBITDA, then adjusting for differences to produce an indicated range rather than a single price.
- Comparable selection is critical. Practices should match in geography, size, specialty, payer mix, provider dependence, and facility quality. Thin or mismatched data sets can produce unreliable results.
- Choosing the correct earnings base matters. Collections multiples ignore profit, SDE applies to doctor-to-doctor deals, and EBITDA multiples reflect DSO or private-equity transactions after replacing owner compensation.
- Buyer type strongly influences value. DSO buyers using EBITDA multiples can price the same practice well above private buyers using collections or SDE multiples.
- McLerran & Associates delivers side-by-side valuations across both buyer markets with CPA-led, diligence-grade EBITDA analysis that can hold up under buyer scrutiny.
Talk to a CPA-led advisor about your practice's value.
Step 1: Select And Adjust Truly Comparable Dental Practice Sales
Comparable selection drives the quality of a market-based valuation and can be where quiet errors cause the most damage. A credible comparable should resemble the subject practice in ways that matter to buyers.
The relevant selection criteria can include:
- Geography and local market. A practice in a dense urban market and one in a rural county function in different markets, even if their collections are identical.
- Size, both collections and profitability. Two practices each collecting $1 million can differ by hundreds of thousands of dollars in value once overhead and owner production are accounted for. A Dental Economics hypothetical illustrates this: one practice at 50% overhead leaves $500,000 before further analysis; one at 80% overhead leaves $200,000.
- Specialty. Buyer demand and achievable multiples can vary across general dentistry, oral and maxillofacial surgery, orthodontics, and pediatric dentistry.
- Payer mix. Fee-for-service revenue and heavily Medicaid-dependent revenue represent different businesses even at identical collections figures, because reimbursement stability and margin can differ materially.
- Provider dependence. A practice where the selling doctor produces the large majority of revenue carries transfer risk that buyers price into the deal. Heavy reliance on the owner-doctor can reduce a practice's valuation by an estimated 10–20%.
- Facility, technology, and growth trajectory. Equipment condition, digital workflow, lease terms, and new-patient trends all affect comparability.
Once comparables are selected, each sale should be adjusted upward or downward for the specific differences between that sale and the subject practice. A small set of well-matched sales, properly adjusted, can be more useful than a large, loosely matched database sample.
The thin-comps problem is real and should be stated plainly. A DealStats download covering dental-practice asset transactions from 2020 through 2024 contained annual observation counts of only 4, 5, 6, 9, and 11 transactions, with roughly half from California or Florida. That sample is informative as a lesson in comparability, yet too small and geographically concentrated to serve as a national benchmark. Dental practice sale prices are not systematically reported in any centralized transaction database, so transaction data cited in valuation reports often reflects broker-published summaries and market reports rather than comprehensive records.
National averages are not comparables, and asking prices are not sale prices, which is why the gap between the two matters. A five-year dataset of closed dental practice sales through 2025 found a median closing price roughly 12.5% below the median asking price, with the gap concentrated in the collections multiple.
Find out what your practice is really worth, request a comprehensive practice valuation.
Step 2: Pick The Right Multiple Base For Your Practice
Three earnings bases are used in dental practice valuation, and the same practice can produce three very different prices depending on which one is applied. They are not interchangeable. Applying the wrong base, or comparing a multiple from one base against a multiple from another, can be one of the most expensive misunderstandings for an owner reading a quoted number.
- Percentage of collections. This base is commonly cited at roughly 70%–85% for private doctor-to-doctor general practice sales, with a wider reported band of approximately 60%–95%. Ken Rubin, a dental CPA and broker, described this rule of thumb in Dental Economics in 2016 and called it only an extremely rough starting point. It functions as a screening metric rather than a full valuation because it ignores profit. Two practices each collecting $1 million, one at 60% overhead and one at 75% overhead, would both value at $750,000 under a 75% collections multiplier despite very different underlying economics.
- SDE (Seller's Discretionary Earnings) multiple. SDE is the profit of the practice plus the owner-dentist's full compensation and discretionary add-backs. It measures the total financial benefit available to a single working owner. BizBuySell data on dental practices sold from 2021 through 2025 shows the middle half of sales at roughly 1.60×–3.37× SDE, with a median of 2.48× SDE. This range applies to private, doctor-to-doctor transactions and is not directly comparable to DSO EBITDA multiples.
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) multiple. EBITDA resets the owner's clinical pay to a market-rate dentist salary, typically estimated at 30%–35% of what the owner personally collects. The multiple then reflects the practice as an operating business rather than the owner's combined professional income and business profit. DSO add-on acquisitions are commonly reported at roughly 5×–8× adjusted EBITDA, while PE-backed platform-level transactions are commonly reported at roughly 9×–11×, with select platforms above $5 million in EBITDA reaching 10×–12×. These ranges reflect 2026 benchmarks and should be treated as ranges rather than promises, because multiples move with practice size, payer mix, provider depth, and market conditions.
Because SDE keeps the owner's full clinical pay in the earnings figure while EBITDA removes it, SDE can run well above EBITDA on the same practice. A 5× SDE offer and a 5× EBITDA offer represent different prices. The right base depends on buyer type and practice size, which is why the two buyer markets should be evaluated separately.
This article does not include a dental practice valuation calculator. For a practical tool, see the Dental Practice Valuation Calculator: Owner's Guide.
Step 3: Build An Indicated Range With A Worked Example
This worked example shows how an EBITDA-based market approach can produce a valuation range. All figures are hypothetical and are used only to demonstrate the mechanics.
Consider a general dental practice that collects $1.4 million annually, with adjusted EBITDA of approximately $420,000. That figure reflects a 30% margin after replacing the owner at market-rate pay. Three well-matched comparable sales from the same region and size band are identified, with adjusted EBITDA multiples of 5.5×, 6.0×, and 6.5×.
Applying each multiple to the $420,000 EBITDA base produces three indications:
- 5.5× × $420,000 = $2,310,000
- 6.0× × $420,000 = $2,520,000
- 6.5× × $420,000 = $2,730,000
The indicated range is approximately $2.3 million to $2.7 million. The range, rather than a single number, is the deliverable.
Now apply the adjustment step to the same $1.4 million practice. Three factors push this practice toward the upper end of the range: lower provider dependence than the comparables (the owner produces 45% of collections rather than 70%), a stronger hygiene program, and a favorable long-term lease. If the payer mix skews toward Medicaid above 30% of revenue, that factor can compress the multiple toward the lower end. A Medicaid payer mix above 30% is associated with a lower multiple, greater earnout reliance, and more intensive diligence.
A single number presented without its comparable set and adjustments should be treated cautiously. The range, and the reasoning behind it, is what a defensible valuation delivers.
Step 4: Compare Doctor-To-Doctor And DSO/Private Equity Buyer Markets
Buyer type can be one of the main factors driving value, and many single-lane valuations ignore this dimension entirely. Doctor-to-doctor deals typically price on a percentage of collections or an SDE multiple. The individual buyer is financing the acquisition, often through an SBA loan, and must service that debt from practice profit while still earning a living. That financing constraint sets a ceiling on what a private buyer can pay.
DSO and private-equity deals price on an EBITDA multiple applied to earnings after the owner is replaced at market pay. The institutional buyer underwrites the practice as an operating business rather than a job. The same $2 million-revenue practice with $400,000 EBITDA can transact at $2.4 million to $2.8 million to a DSO buyer at 6×–7× EBITDA, but at only $1.3 million to $1.7 million to a private buyer at 65%–85% of collections, a 40%–80% difference on the identical operation.
Access to the DSO buyer pool depends on practice size and economics. Below roughly $250,000 in adjusted EBITDA, the DSO buyer pool for dental practices mostly disappears, and practices are priced on collections or SDE by individual dentists instead.
The headline multiple in a DSO deal often differs from the cash a seller receives. Institutional offers at the high end of the EBITDA multiple range typically carry rollover equity, earnouts contingent on post-close performance, three-to-five-year clinical employment requirements, and asset-versus-stock tax trade-offs. As a result, seller cash-at-close can be a fraction of the headline offer price, paid out over a multi-year horizon.
McLerran & Associates is a well-positioned advisor for this comparison because the firm works both paths in roughly equal measure, approximately 50/50 between private-buyer and DSO transactions. That split is rare, since most brokers operate in one lane. Because McLerran runs both markets, it produces a true side-by-side market valuation that quantifies the practice's worth in both buyer pools, something a single-lane broker or generalist advisor typically cannot deliver.
See your practice valued in both buyer markets, schedule a discovery call.
Step 5: Know The Limits Of The Market Approach
Even with both buyer markets mapped, the market approach has hard limits, and a credible valuation is candid about them. The following limitations are structural rather than exceptional:
- No centralized transaction database exists. No independent data provider publishes a dental-specific multiple series, so reported ranges often reflect broker-published summaries and market commentary rather than a comprehensive public index.
- Asking prices differ from sale prices. Only 22% of listed dental practices publish an asking price, and published asking prices belong to the brokers who wrote the listings. They reflect seller expectations rather than verified market value.
- National averages rarely function as true comparables. A practice in one region, specialty, and size band cannot be reliably benchmarked against a national average drawn from a thin, geographically concentrated sample.
- Local comp sets are often thin. Stretching the definition of “comparable” to pad a peer group can make results worse. When an analyst can find only two or three rough comparables, the resulting multiples can carry significant uncertainty.
- Rule-of-thumb anchoring creates costly errors. The ADA's 2013 Practical Guide to Valuing a Practice states that a rule of thumb can help with quick, general decisions but should never be used to make the final determination of a practice's value.
When the market approach should carry less weight, such as when the comparable set is too thin, when the practice has highly unusual economics, or when income or asset methods produce materially different indications, a qualified advisor will usually explain that weighting. For a broader discussion of when each method applies, see How To Value a Dental Practice in 2026: The Methodology.
Step 6: Put Your Valuation Range To Work
A valuation is only as durable as the work behind it. A CPA-led, diligence-grade analysis controls the narrative around EBITDA before the deal goes to market, so every add-back, such as above-market owner compensation, personal expenses run through the practice, and non-recurring items, is documented and defensible. That preparation pays off when a buyer's quality-of-earnings team arrives in diligence, because the numbers hold and the deal typically does not get re-traded.
McLerran & Associates has completed approximately 2,000 successful practice sales, representing roughly $2 billion in closed transaction volume, with more than 10,000 practices evaluated. The firm's transaction rate of approximately 85–90% compares to an industry norm closer to 35–40%, a difference that can reflect both the quality of the valuation work and the structured, competitive process the firm runs on behalf of every client.
For additional methodology context, see Dental Practice Valuation Methods: Know Your Worth and How to Value a Dental Practice: Multiples & Methods.
Frequently Asked Questions
The questions below cover the points practice owners ask most often after seeing a valuation range.
How Much Does an Average Dental Practice Sell For?
Reported medians for closed dental practice sales vary by source, buyer type, and practice size, and averages function poorly as comparables. A practice collecting $1 million annually might screen at $700,000–$850,000 under a percentage-of-collections approach. The same practice could transact at a materially higher or lower figure depending on its profitability, payer mix, provider dependence, and which buyer market prices it. Practices with strong EBITDA and low provider dependence that attract DSO interest can transact well above what a collections-based rule of thumb would suggest. Practices with high overhead or heavy owner dependence can transact below it. The average describes the market broadly but says little about one specific practice.
What Is the Dental Practice Valuation Formula?
The market-approach formula is: financial base × multiple, adjusted for differences between the subject practice and the comparables, then expressed as a range. The financial base is collections, SDE, or EBITDA, and the choice of base depends on buyer type. The multiple is drawn from comparable transactions and adjusted for the subject practice's specific characteristics. The output is an indicated range rather than a single number. No formula produces a reliable answer without first selecting the right base, identifying genuinely comparable sales, and making appropriate adjustments for the differences between those sales and the practice being valued.
Why Do Two Practices With the Same Collections Sell for Different Prices?
Collections measure revenue received but do not show what remains after expenses or how much of that revenue depends on the selling doctor personally. Two practices each collecting $1 million can differ substantially in value based on overhead, since a practice at 55% overhead leaves far more profit than one at 72%. Owner production also matters, because a practice where the owner produces 80% of collections carries significant transfer risk. Hygiene strength plays a role, since a robust hygiene program signals recurring, lower-risk revenue. Payer mix influences both margin and patient loyalty, because fee-for-service revenue often carries better margins and can signal loyalty to the practice rather than the insurance plan. These factors help determine both the earnings base and the multiple a buyer is willing to apply.
What's the Difference Between an SDE Multiple and an EBITDA Multiple?
SDE (Seller's Discretionary Earnings) adds the owner-dentist's full compensation back to practice profit, measuring the total financial benefit available to a single working owner. An SDE multiple is typically used in private, doctor-to-doctor transactions where the buying dentist will work in the practice. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) subtracts a market-rate dentist salary from SDE, measuring the practice as an operating business independent of who owns it. A DSO or private-equity buyer usually uses an EBITDA multiple because they are underwriting the business rather than buying a job. As noted in Step 2, the two bases are not interchangeable, and a 5× SDE offer differs meaningfully from a 5× EBITDA offer on the same practice.
Can I Get a DSO-Level Multiple on My Practice?
Access to DSO-level EBITDA pricing depends on several factors. Practice size matters, because practices below a certain EBITDA threshold largely fall outside the institutional buyer pool. Provider depth matters, since a practice where the selling doctor produces the large majority of revenue carries transfer risk that buyers discount. Payer mix influences multiples, because heavy Medicaid exposure is associated with lower multiples and more earnout reliance. Specialty also plays a role, as buyer demand varies across general dentistry and the various specialties. Practices that clear the institutional-buyer qualification floor, with sufficient collections, multiple operatories, a transferable patient base, and meaningful EBITDA, can access DSO pricing. Those that do not are typically priced in the private-buyer market. A side-by-side valuation from an advisor who works both markets can help show which path serves a specific practice.
Conclusion: Use Your Range And Compare Both Markets
The market approach is a disciplined comparison exercise that produces a range, not a promise. It produces an indicated range built from comparables that should be selected, adjusted, and applied to the right earnings base for the right buyer. Many doctors see one number from one market, and that number may be accurate for one buyer type yet materially off for another.
The buyer market a practice is priced into can be one of the main variables in the outcome. A doctor-to-doctor deal and a DSO affiliation can produce very different prices on the identical practice, and a side-by-side analysis with consistent rigor across both markets can help a doctor see which path fits better.
McLerran & Associates is a dental-specific sell-side advisor for understanding how the market approach values a dental practice because it runs both the doctor-to-doctor and DSO or private-equity buyer markets in roughly equal measure, producing a true side-by-side market valuation, and its CPA-led, diligence-grade EBITDA analysis is built to hold up when buyers scrutinize it.
This article is educational in nature and does not constitute investment, tax, or legal advice. Readers are encouraged to consult their own qualified advisors before making any transition decision.
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