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What’s My Practice Worth?

Posted in BGP Blog

We’ve helped more than 25 physician practices successfully partner with private equity (PE). From this experience, we’ve developed a quick way for you to estimate your practice’s value. Here’s how to start:

  1. What Is Your Practice’s EBITDA?

EBITDA is your practice’s profit or cash flow after paying partners a fair market salary. To estimate EBITDA:

  1. Add up the total pay (salary, bonuses, distributions, and benefits) for all equity partners in your practice over the past year.
  2. Find the market salary for an employed physician in your specialty and multiply it by the number of partners.
  3. Subtract the market salary total from the partners’ total pay today.

Example:

 

  1. What Is the Market Valuation Multiple for Similar Practices?

The value of your practice depends on many factors—EBITDA, growth potential, specialty, location, and the number of providers. The better these look to investors, the higher your valuation multiple will be.

Physician practices can sell for about 5.0x to more than 10.0x EBITDA. If you’d like more guidance for your practice, feel free to email me at: [email protected]

 

  1. Multiply Your EBITDA by the Valuation Multiple

Take your practice’s EBITDA and multiply it by the valuation multiple to get an estimate of its worth.

Example:
If your practice has $1 million in EBITDA and the valuation multiple is 6.0x, it could be worth $6.0 million (6.0 × $1 million).

This quick method gives you a high-level estimate. For a more accurate valuation, we’ll need to analyze your financials and other key factors.

Let’s Talk Further

Have questions about PE or your practice’s value? Let’s talk.
Email: [email protected]

Call/Text: 734-224-4746