Appraisal Mechanics
Key Drivers of Practice Valuation
While general brokers often apply a naive "percentage of collections" formula (typically 65% to 85%), institutional dental lenders and experienced buyers analyze adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and cash flow available for debt service.
The primary factors that determine the real market value of a Southern California practice include:
Adjusted Net Cash Flow (SDE): Recasting the P&L to add back non-operational owner perks, personal auto expenses, discretionary family compensation, and one-time capital purchases.
Active Patient Base & Recare: The number of unique patients seen within the past 18 to 24 months, average production per patient, and hygiene re-appointment rates.
Reimbursement & Payer Mix: Percentage of revenue generated from private Fee-For-Service, preferred PPO networks, and Denti-Cal / capitation.
Facility Capacity & Digital Infrastructure: Number of fully equipped operatories vs. plumbed operatories, cone beam CT (CBCT), intraoral scanners, digital sensors, and mechanical room age.
Facility Lease Duration: Banks require the buyer to secure a lease term equal to the loan amortization (typically a 10-year term via options). Without a secure lease, a practice cannot be financed.
Important Note: Online forms and broker consultation reviews provide preliminary fair-market guidance and do not constitute a certified appraisal, formal fairness opinion, tax, or legal advice.
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