Valuing a Medical Practice: Multiples Explained

Valuing a medical practice is more art than science. Unlike other businesses, the "Product" (the doctors) can walk out the door. This risk is factored into the valuation.

The Valuation Formula

General Practices typically sell for 3x to 5x EBITDA (Earnings Before Interest, Tax, Depreciation, Amortization).
Example: If your practice makes $200k profit (after paying all doctors market rates), it might be worth $600k - $1m.

Value Drivers

• Doctor Contracts: Are your doctors locked in with long-term service agreements? This adds value.
• Mixed Billing: Practices with private billing capability are often valued higher than 100% bulk billing clinics due to margin protection.
• Location & Lease: A long lease in a high-growth area is a major asset.