When it comes to selling your dental practice, understanding its true value is crucial. It’s not just about the revenue—it’s about what your practice can earn in the future.
While there are a few ways to calculate the value of your dental practice, an earnings-based approach — recast EBITDA, sometimes called owner benefit or seller’s discretionary earnings — is how most transitions get priced today, particularly anything involving a DSO.
Why earnings? Because they focus on what really matters: your practice’s ability to generate income from day-to-day operations.
Whether you’re selling to an individual or a corporate buyer (like a DSO), understanding how your earnings get recast is key to negotiating from a position of knowledge.
In this post, we’ll explain how recast EBITDA works, show you how to calculate it, cover the practice metrics that move your multiple, and be honest about when a rule-of-thumb number isn’t enough.
Plus, we’ve got a free dental practice valuation calculator to help you get a rough estimate in minutes.
Let’s dive in.
Why Earnings — and Why “Recast”?
An earnings approach strips away the noise and focuses on what the practice actually produces. By removing taxes, debt interest, and depreciation, EBITDA gives a clearer picture of operating performance than net income does.
But raw EBITDA alone doesn’t work for an owner-operated dental practice. Your net income reflects whatever you chose to pay yourself, plus whatever personal or one-time items ran through the practice. Recasting normalizes all of that so a buyer can see what the practice would earn under their ownership.
For example, if your practice has a large equipment loan or a buildout you depreciated aggressively, those choices make the practice look less profitable than it really is. Recasting levels the playing field by focusing on the cash the practice generates, not the accounting and compensation decisions you made along the way.
How to Calculate Recast EBITDA
The math isn’t complicated — the judgment is.
Start with your practice’s net income, and then add back the following:
- Interest: On loans or debts
- Taxes: Income tax expenses
- Depreciation and amortization: Including any accelerated or bonus depreciation you claimed on equipment or your buildout — a tax decision, not an operating cost.
- Owner compensation, normalized: This is the big one. Add back everything you paid yourself — salary, distributions, benefits — then subtract what it would cost to hire an associate to do your clinical production, commonly 25%–35% of the collections you personally generate. What’s left is earnings that survive your departure.
- Discretionary and non-recurring items: Above-market rent if you own the building and lease it to yourself, the practice vehicle, personal travel or meals, a family member on payroll who doesn’t work in the practice, and one-time costs like a legal settlement or a relocation. Each add-back has to be documentable — a buyer’s diligence team will ask.
What you’re left with is recast EBITDA — the number a buyer will actually underwrite. Expect them to test every adjustment, so keep clean books and be ready to support each one.
Applying the Multiple
Once you have your recast EBITDA, a buyer applies a multiple to it to arrive at a value.
Reported multiples in dental transitions typically fall somewhere in the low-to-mid single digits, and the range widens considerably at the top end for larger practices. There is no official published table — dental transactions are private, so any specific range you see quoted (including ours) is a generalization from broker and advisor experience, not a market index. What actually sets your number:
- Market conditions: The overall health of the dental industry and local demand can push the multiple higher or lower.
- Growth and capacity: Steady collections growth helps. So does unused capacity — operatories plumbed but not staffed, or hygiene booked so far out you’re turning patients away. A buyer pays for the upside they can unlock.
- Size and scale: Larger practices and multi-location groups tend to earn higher multiples because of their stability and ability to scale. This is also the threshold question for DSO interest — groups doing platform or “banking the practice” deals generally focus on practices with roughly $500K or more in recast EBITDA. Below that, you’re usually looking at an individual buyer or a smaller regional group.
- Risk factors: A more stable practice with predictable collections and a loyal patient base will often command a higher multiple because it presents less risk to buyers. Heavy dependence on one referral source, one insurance plan, or on you personally cuts the other way.
- Buyer type: A corporate buyer (like a DSO) often pays a higher multiple than an individual, since they can integrate the practice into a larger network. But headline multiples and cash at closing are different things — DSO offers frequently include equity rollover and multi-year post-sale employment, so compare structures, not just the top-line number.
What Actually Moves Your Number
Buyers don’t just take your earnings figure; they check whether it’s durable. A few benchmarks worth knowing before anyone else runs them on you:
- Total overhead: A healthy general practice typically runs about 55%–65% of collections, and anything sustained at 70% or higher is a problem a buyer will price in. Fixing overhead before a sale raises both your earnings and the multiple applied to them.
- Supplies and lab: Together, roughly 6%–8% of collections in most general practices. A supply line running well above that is often a purchasing or inventory-control issue, and it’s a quick, visible win.
- Net collections: Aim to collect roughly 98% of what you produce after contractual adjustments. Persistent gaps point to insurance AR problems, and unresolved aging AR rarely converts to sale price.
- Associate economics: If associates produce a meaningful share of your collections at 25%–35% compensation, that’s earnings a buyer can count on continuing after you leave — which is worth more than production tied to you personally.
An Example:
If your practice has recast EBITDA of $500,000 and the multiple is 5, the practice would be valued at roughly $2.5 million ($500,000 × 5). Worth noting: $500,000 of recast EBITDA generally implies a large or multi-doctor practice, not a typical solo office — the arithmetic works the same at any size, but the multiple usually doesn’t.
Selling to an Individual vs. a Corporate Buyer (DSO)
Who you’re selling to can make a big difference in how your practice is valued. In general terms:
- Selling to an Individual: Individual buyers look at the current state of the practice and its potential for stable income, and they’re usually constrained by what a lender will finance. Multiples tend to be lower, because the buyer is taking on more risk and often replacing your production personally.
- Selling to a Corporate Buyer (DSO): Corporate buyers tend to pay higher multiples because they have the resources to scale and can capture economies of scale across a network. In exchange, expect a more complex structure — a portion of the price in equity rather than cash, and a commitment to stay on and produce for several years.
When a Rule of Thumb Isn’t Enough
For getting oriented before a sale, an earnings-based estimate is usually enough. But there are situations where it is not, and it’s worth knowing which is which.
A formal, defensible valuation is generally needed for a divorce, a partner buy-in or buy-out, estate or gift tax reporting, a buy-sell agreement, or SBA-backed financing. For estate and gift purposes, for instance, Treasury regulations require valuing a business interest on a fair appraisal of all assets including goodwill together with the demonstrated earning capacity of the business (26 CFR §20.2031-3) — a single earnings multiple on its own won’t satisfy that standard.
There’s also a difference worth naming: a calculator or an advisor’s estimate is a planning number. A formal valuation opinion is a separate engagement with its own standards and documentation. If you need the second one, ask for it by name.
Use Our Free Dental Practice Valuation Calculator
As you can see, valuing a dental practice can be complex, but we’ve made getting a first estimate easier.
Our free Dental Practice Valuation Calculator can give you a ballpark figure. Just enter a few key financial details, and the calculator will do the rest.
Whether you’re thinking of selling or just want a clearer picture of your practice’s value, this tool is a starting point — not a valuation.
Try the Dental Practice Valuation Calculator to get your estimate in a couple of minutes.
Planning To Buy or Sell a Dental Practice? Let’s Talk
Valuing a practice is a complicated process, and Core Advisors is here to help.
We work from your actual numbers, not rules of thumb — and because our tax, accounting, and wealth management teams sit under one roof, the conversation doesn’t stop at a valuation. What you’ll net after tax, how the proceeds fund your retirement, and when to sell are the same conversation, with the same team.
Ready to understand what your practice could be worth — and what you’d actually keep? Book a call today, and let’s get started.
This article is for educational purposes only and is not tax, legal, or valuation advice. Multiples, benchmarks, and dollar examples are approximate general industry references as of 2026 and vary widely by practice, market, and deal structure; they are not an appraisal or an opinion of value for any specific practice. Please consult your own tax, legal, and financial advisors about your specific situation.
