Ask three people what your practice is worth and you’ll get three answers. A percentage of collections from the broker down the street. A round number from the dentist who sold last year. A polite “it depends” from your CPA. When I was selling, I heard all three. None of them explained how a buyer would actually price my practice.

Here’s the short version: buyers don’t pay for collections. They pay for EBITDA.

The number buyers actually price

EBITDA is what your practice earns after every real cost of running it, including the cost of replacing your own clinical time at market rate. It’s the cash the practice generates for whoever owns it. When a DSO looks at your practice, this is the number they start from, and the price is a multiple of it.

Everything else, collections included, matters only as evidence of where EBITDA is and where it could go.

Why identical practices sell for very different prices

Two practices with identical collections can have valuations three times apart. The difference has nothing to do with how hard either dentist works.

Take two general practices, each collecting $1.2 million. One runs at 55 percent overhead, mostly fee-for-service, fully digital, with an owner willing to stay two years after close. The other runs at 72 percent overhead, mostly PPO, with an owner who wants to hand over the keys at closing.

The first practice earns more, carries less risk, and gives the buyer time to hold onto patients. The buyer pays a multiple of a bigger number, and pays a higher multiple. Same collections. Very different checks.

What moves your number

  • Overhead. Every point below your peers flows straight into EBITDA.
  • Payor mix. A fee-for-service dollar is worth more to a buyer than a PPO dollar.
  • Capacity. Operatories you aren’t using are growth a buyer doesn’t have to build.
  • Technology. An up-to-date practice costs less to integrate, and buyers price that in.
  • Your timeline after close. Staying 1 to 3 years lowers the buyer’s risk. Buyers pay for less risk.
  • Trajectory. Collections that grew last year beat collections that slid, even at the same level.

If that list looks familiar, it should. It’s the same set of things I ask about in the valuation review.

What I’d do first

Know your own EBITDA before anyone with a stake in your decision tells you a number. You don’t need to sign anything to get there. You need your P&L, an honest accounting of your own compensation, and someone who can tell you what a buyer would see.

If you want a second set of eyes, that’s what the free valuation review is. Send me your numbers and I’ll reply within 48 hours with my honest read: where your practice likely stands, what a buyer would focus on first, and what questions to ask before you talk to anyone.

— Kevin