Valuation methodology
Dental practice valuation in Australia
In Australia, a dental practice is valued primarily by capitalising its adjusted EBITDA — typically at a multiple of about 3× to 5× — cross-checked against 60% to 90% of annual gross fees and recent comparable sales. Where your practice sits comes down to one thing above all: how much of the profit survives without you.
What the valuation of a dental practice involves
The starting point is your profit — but not the profit on your tax return. A valuer normalises earnings to show what a new owner would actually make: adding back one-off and non-business costs, and replacing the owner-dentist's drawings with a market-rate wage for the clinical work they perform. The result is adjusted EBITDA (earnings before interest, tax, depreciation and amortisation), which is then multiplied by a market multiple to give the practice's going-concern value.
The methods, and why we use more than one
1. Capitalisation of adjusted EBITDA (primary). Adjusted EBITDA × a multiple, commonly 3×–5× for Australian dental practices. This is what buyers, banks and professional valuers lead with.
2. Percentage of gross fees (cross-check). A faster sense-check valuing the practice at roughly 60%–90% of annual gross fees. It ignores your margin, so it's blunt — but when it agrees with the EBITDA result, confidence in the range rises.
3. Comparable sales. What similar practices have actually sold for, adjusted for size, location and structure. When two or three independent methods land in a similar place, you have a number you can defend.
What moves your multiple — up or down
- Owner reliance — the single biggest driver. If the profit walks out the door with you, buyers discount heavily.
- Associates & hygiene revenue — profit from employed clinicians is worth more than profit from the owner.
- Lease — a long, assignable lease on fair terms protects value; a short or uncertain one erodes it.
- Location & competition — catchment demographics, growth, and the density of nearby practices.
- Systems & records — clean financials, documented processes and stable staff reduce buyer risk.
- Equipment & fit-out — modern, well-maintained surgeries versus deferred capital spend.
Goodwill and tangible assets
The multiple captures goodwill and going-concern value. Equipment, fit-out and stock are then assessed separately at fair market or written-down value and added, depending on whether the deal is structured as a share sale or an asset sale.
A worked example
Consider a suburban practice with:
- Annual gross fees: $1,200,000
- Adjusted EBITDA (after a market-rate owner wage): $360,000 — a 30% margin
Applying both methods:
- EBITDA method: $360,000 × 3–5 = $1.08M – $1.8M
- Gross-fees method: $1,200,000 × 60–90% = $720k – $1.08M
The overlap around $1.0M–$1.1M is a sensible central estimate, with the ceiling reserved for a well-systemised, low-owner-reliance practice. Try it with your own figures →
Valuation by purpose
The right approach depends on why you need the valuation — see all valuation purposes:
- Family law settlement
- Buy-in or buy-out
- ATO / Small Business CGT concession
- Expert witness / dispute
Estimate vs formal valuation
Our practice value calculator applies the multiples above to your headline figures — a genuine starting point. But it can't read your lease, meet your team, or assess your patient base. A formal valuation does, and produces a documented report that buyers, banks, courts and the ATO take seriously.
Frequently asked questions
How is a dental practice valued in Australia?
By capitalising adjusted EBITDA at roughly 3 to 5 times, cross-checked against 60 to 90 percent of gross fees and comparable sales.
What multiple do dental practices sell for?
Most trade around 3x to 5x adjusted EBITDA — the upper end for larger, systemised, associate-driven practices, the lower end for smaller owner-reliant ones.
Is goodwill included in the valuation?
Yes — the going-concern value from the multiple already includes goodwill. Equipment, fit-out and stock are typically valued separately and added.
How long does a valuation take?
A formal report is typically prepared within [TODO: turnaround] of receiving complete information.
When do you need a valuation of a dental practice?
Most often for a sale or purchase, a partner buy-in or buy-out, a family-law property settlement, an ATO or CGT market valuation, bank finance, or a dispute requiring expert evidence. The method is broadly the same; the standard of documentation and independence each purpose demands is not.
Do you value orthodontic and other specialist dental practices?
Specialist practices are valued on the same adjusted-EBITDA basis as general practices, with closer attention to referral-source concentration and how transferable those referral relationships are to a new owner. [DATA NEEDED: confirm which specialist practice types are in scope — e.g. orthodontic, periodontic, oral surgery, prosthodontic.]
How accurate is an online estimate?
It's a useful starting range, not a valuation — it can't see your lease, staff, patients or equipment. Treat it as a sense-check, then commission a formal report.
General information only, not financial or valuation advice.