Adjusted EBITDA × a multiple is the standard basis for private and mixed practices — and for anything a corporate group might buy. Earnings are adjusted ("add-backs") to show what a new owner would really receive, then multiplied by a factor reflecting size, quality and risk. Percentage of gross fee income survives as a shorthand for predominantly NHS practices, where the contract makes revenue highly predictable.
Two practices with identical turnover can support wildly different valuations depending on what's added back. The critical adjustment is the principal's clinical salary: the earnings must charge a realistic market cost for the dentistry the owner performs, because the buyer either does that work (and their time isn't free) or pays an associate to do it. Understated clinical salaries inflate EBITDA — it's the oldest trick in the sales pack. Watch also for "one-off" costs that recur, family members on the payroll, and rent adjustments where the seller owns the freehold.
Most of the factors above respond to two or three years of deliberate preparation — documenting associate arrangements, diversifying income, reducing your personal clinical dependence, cleaning the cost base. That's why exit planning starts early: see selling your practice.
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It varies with size, income mix and buyer type — smaller owner-operated practices trade at lower multiples, while large, associate-led practices attractive to corporate groups command significantly higher ones. The multiple matters less than the EBITDA it's applied to: that's where valuations are really won and lost.
Predominantly NHS practices are often discussed as a percentage of gross fee income because the contract makes revenue predictable, though serious buyers will still test the underlying profitability. Contract security, UDA rate and delivery history all move the price.
Adjustments to reported profits intended to show what a new owner would really earn — adding back the seller's personal expenses, one-off costs and non-market salaries. Buyers should verify every one, and insist a realistic clinical salary for the principal's own dentistry is charged against the earnings.
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