How to Value a Dental Practice: What the Number on the LOI Actually Means

Every dental practice owner gets a number eventually. It might come in the form of an LOI from a DSO. It might come from a broker during a preliminary conversation. It might be a figure your accountant throws out at year-end as a rough estimate of what your practice is worth.

The question isn't whether you'll get a number. The question is whether you'll know what to do with it when it arrives — whether you'll be able to evaluate it critically or whether you'll take it at face value because you don't have an independent basis for comparison.

Most dentists have no idea how their practice was valued. That's a problem.

Start with EBITDA — because everything else flows from it

Dental practice valuation, at its core, comes down to one formula: some multiple of EBITDA. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a proxy for the cash the business actually generates.

But here's what trips most practice owners up: your EBITDA as reported on your tax return almost certainly understates the true earnings of your practice. Owner compensation structures, personal expenses run through the business, one-time costs, discretionary spending — all of these can legitimately be added back to produce a "normalized" EBITDA that more accurately reflects the practice's earning potential for a buyer.

The gap between your reported EBITDA and your normalized EBITDA can be substantial. I've seen it move a valuation by seven figures.

What multiple should you expect?

This is where things get more nuanced, and where I'll be honest: there's no single right answer. Multiples in dental transactions have ranged from roughly 4x to over 10x EBITDA depending on practice size, geography, payor mix, growth trajectory, and — frankly — market timing and which DSO groups are actively acquiring.

Smaller practices (under $1M collections) typically land at lower multiples. Larger practices and group practices command higher ones. Practices with strong hygiene recall systems, favorable payor mix, and multi-doctor operations tend to attract more aggressive offers.

What I can tell you is that knowing your multiple range — before the LOI arrives — puts you in an entirely different negotiating position than learning about it for the first time when a DSO hands you a number.

The three things that move your valuation before you sell

The time to improve your practice valuation is two to four years before you plan to sell. Not six months before. There are three levers that have a meaningful impact on the final number.

The first is revenue mix. Practices with lower PPO dependence and stronger fee-for-service or membership plan revenue command higher multiples. A practice doing $1.5M at 60% PPO and one doing $1.5M at 30% PPO are not worth the same amount to a DSO acquirer. The DSI PPO Profitability Tool can show you exactly what your current PPO contracts are costing you in real dollars.

The second is operational infrastructure. DSOs pay more for practices that have documented systems, trained teams, and scalable operations. If your practice runs on tribal knowledge — everything lives in your head or in the office manager's — it doesn't look as attractive to a sophisticated buyer as a practice with standardized protocols and solid reporting.

The third is clean financials. Normalized, consistently formatted P&Ls for three to five years. Owner comp reported honestly. One-time events documented as such. Buyers do due diligence. Clean books reduce friction, reduce time-to-close, and tend to produce better offers.

Don't rely solely on a broker's number

Dental practice brokers do valuable work. But they're also typically compensated on commission — which means their incentive is to close the transaction. That's not a conflict that disqualifies them; it's a reality you should factor in. Having an independent valuation, or at minimum an independent appraisal of your assets, gives you a floor number that isn't dependent on any one party's motivation.

The DSI Dental Office Appraisal Tool and the companion work at DentalAssetIQ both give you data-driven starting points for understanding what your hard assets and practice are worth before you ever sit across a table from a buyer.

For the full framework — including how to structure a pre-sale audit, how to work with advisors, and how to read the specific valuation language in a DSO offer — Dental Office Valuation & Appraisal lays it out in detail.

The bottom line

The LOI number is a starting point, not a final offer. Knowing how it was derived, what assumptions it rests on, and what would have to be true to justify a higher number — that's the knowledge that separates dentists who leave money on the table from those who don't.

Check out our Dental Strategy Institute YouTube Channel for this and other great videos.