--- title: "What is EBITDA in a dental practice sale? A plain guide" description: "EBITDA is a measure of earnings used in practice sales, but it has limits. Learn what it counts, what adjusted EBITDA adds back, and why to involve a CPA." url: https://joncopeland.multisites.ai/blog/ebitda-dental-practice-sale publisher: Copeland Consulting Services email: drcopeland@joncopelanddds.com contact: https://joncopeland.multisites.ai/contact --- # What is EBITDA in a dental practice sale? A plain guide EBITDA means earnings before interest, taxes, depreciation and amortization. Buyers and valuators use it to compare earnings, but it is not a standard accounting measure and its limits are well known. Adjusted EBITDA adds back selected items. Have a CPA and valuator review how it is figured. Practice managementPublished October 26, 20264 min read EBITDA is a finance term that comes up when a dental practice is valued or sold, especially to a group or a dental support organization. This post explains what the term means, what “adjusted” means, and why it is only one input into a valuation. It gives no multiples and no price ranges, and it is not tax or valuation advice. ## What does EBITDA mean? EBITDA stands for earnings before interest, taxes, depreciation and amortization. The SEC describes EBITDA as “earnings before interest, taxes, depreciation and amortization.” In its guidance, “earnings” means net income as shown in the statement of operations under GAAP. So the measure starts with net income and adds back four items. The glossary entry on [EBITDA](https://joncopeland.multisites.ai/glossary/ebitda) gives the short definition. In practice, the number tries to show how much the operation earns before financing choices, tax status and the age of its equipment. Term Plain meaning Interest Cost of borrowed money Taxes Income taxes on the business Depreciation Spreading the cost of equipment over its life Amortization Spreading the cost of certain intangible assets over time ## Is EBITDA a standard measure? No. It is a non-GAAP measure, which means it is not one of the numbers set by U.S. accounting rules. The SEC says that a measure “calculated differently” from its EBIT and EBITDA description should not be called EBIT or EBITDA. Its title should be distinguished, “such as” Adjusted EBITDA. For a dental owner, this means two buyers or valuators can compute a similar-sounding number for the same practice and get different results. Always ask how the figure was built and what was included. EBITDA also leaves out real costs. A dental practice that must replace imaging equipment or chairs has costs that the number does not show. That is why a CPA should look at cash flow and tax effects alongside it. ## What is adjusted EBITDA? Adjusted EBITDA starts with EBITDA and adds back selected items. The SEC uses “Adjusted EBITDA” as an example of a title for a measure that is calculated differently from plain EBITDA. The seller or buyer chooses the items, so the label alone does not tell you what was added back. In a dental sale the same idea appears as [adjusted EBITDA](https://joncopeland.multisites.ai/glossary/adjusted-ebitda). Typical questions are which owner costs are one-time or personal, and how to treat [owner compensation](https://joncopeland.multisites.ai/glossary/owner-compensation). A buyer may replace the owner’s pay with a market-based dentist salary to see what the practice earns without the owner’s draw. These are judgment calls. Every add-back should be written down, supported by records and checked by a CPA. Unsupported add-backs are a common source of disputes in a sale. ## How do buyers and valuators use EBITDA? EBITDA often serves as the base for the [income approach](https://joncopeland.multisites.ai/glossary/income-approach) and for a [valuation multiple](https://joncopeland.multisites.ai/glossary/valuation-multiple). A multiple is a number applied to earnings to estimate value. This post gives none. No source opened for it supports a dental multiple, and published figures vary by deal, year and buyer type. Treat any multiple you hear as a claim to check: ask for the source, the deal set, the year and how EBITDA was defined. The [dental practice valuation methods](https://joncopeland.multisites.ai/blog/dental-practice-valuation-methods) post explains the three approaches in which EBITDA may appear. The [valuing a dental practice guide](https://joncopeland.multisites.ai/guides/valuing-a-dental-practice) covers the bigger picture. ## Why do groups talk about EBITDA more than solo buyers? Dental support organizations (DSOs) and investors may compare many practices, and a common earnings measure helps with that. The ADA Health Policy Institute reported that 13 percent of dentists nationwide were affiliated with a DSO in 2022. The glossary entry on [dental support organization](https://joncopeland.multisites.ai/glossary/dental-support-organization) explains the model. A buyer who borrows to purchase a practice may also look closely at cash flow and loan payments. Ask each buyer which measures they use. ## What are the common mistakes with EBITDA? Three questions help avoid trouble. - **Is the period clear?** A single strong or weak year can mislead. Ask which years the figure covers. - **Are the add-backs supported?** Each one needs a record. A buyer’s CPA will test them during [due diligence](https://joncopeland.multisites.ai/glossary/due-diligence). - **Is the definition shared?** Put the formula in writing. Because measures calculated differently can carry similar names, the buyer and seller should agree on the method before they compare numbers. ## What should a seller prepare? 1. Past financial statements, ready for the CPA to review. 2. A written list of proposed add-backs with records for each. 3. A list of equipment age and likely replacement needs. 4. The lease, staff costs and any related-party costs. 5. A question list for the buyer: how do you define EBITDA, what do you add back, and what happens to my price if you change the definition? The ADA tells sellers to assemble a team: a valuator, an attorney, a certified accountant “who is experienced in dental practice sales” and a financial advisor. It also suggests interviewing “a broker experienced in selling dental practices.” A [letter of intent](https://joncopeland.multisites.ai/glossary/letter-of-intent) usually states how the price is figured, so have an attorney read it before you sign. ## Next step Read the [valuing a dental practice guide](https://joncopeland.multisites.ai/guides/valuing-a-dental-practice) for the wider process, then bring your records to a CPA, a valuator and an attorney. To discuss practice transitions with Dr. Jon Copeland, DDS, a general dentist in Wildwood, Missouri, [contact Dr. Copeland about consulting](https://joncopeland.multisites.ai/contact?topic=consulting). ## Frequently asked questions ### What does EBITDA stand for? Earnings before interest, taxes, depreciation and amortization. The SEC uses that wording, and it says the word earnings means net income as presented under U.S. generally accepted accounting principles (GAAP). ### Is EBITDA a standard accounting number? No. EBITDA is not a GAAP figure. The SEC says a measure calculated differently should not be called EBITDA and should carry a different title, such as Adjusted EBITDA. Ask how any figure was built. ### What is a valuation multiple? It is a number applied to earnings or another base to estimate value. This post does not give one. Ask a valuator or broker where any multiple came from, what deals it covers and which year. ## Terms on this page - [Dental support organization](https://joncopeland.multisites.ai/glossary/dental-support-organization) - [Owner compensation](https://joncopeland.multisites.ai/glossary/owner-compensation) - [Practice valuation](https://joncopeland.multisites.ai/glossary/practice-valuation) - [Valuation multiple](https://joncopeland.multisites.ai/glossary/valuation-multiple) - [Letter of intent](https://joncopeland.multisites.ai/glossary/letter-of-intent) - [Adjusted EBITDA](https://joncopeland.multisites.ai/glossary/adjusted-ebitda) - [Income approach](https://joncopeland.multisites.ai/glossary/income-approach) - [Due diligence](https://joncopeland.multisites.ai/glossary/due-diligence) - [Cash flow](https://joncopeland.multisites.ai/glossary/cash-flow) - [ADA](https://joncopeland.multisites.ai/glossary/ada) ## Sources 1. [SEC: Non-GAAP Financial Measures, Compliance and Disclosure Interpretations, Section 103 (EBIT and EBITDA)](https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/non-gaap-financial-measures) 2. [SEC: Non-GAAP Financial Measures, Question 103.01 answer](https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/non-gaap-financial-measures) 3. [ADA: What to Do When Selling a Practice](https://www.ada.org/resources/practice/practice-management/what-to-do-when-selling-a-practice) 4. [ADA News: More dentists affiliating with DSOs (June 2023)](https://adanews.ada.org/ada-news/2023/june/more-dentists-affiliating-with-dsos/) Written by Copeland Consulting Services and checked against the sources above on October 26, 2026. Rules, data and guidance change, so check the linked page before you act on it. ## Keep reading - [Valuing a dental practice: methods, inputs and questions to askA dental practice is valued with a method, not a rule. The SBA lists five: capitalized earning, excess earning, cash flow, tangible assets, and specific intangible assets. Each needs records such as financial statements and tax returns. The result depends on the inputs and the person doing the work. Use an independent valuator.](https://joncopeland.multisites.ai/guides/valuing-a-dental-practice) - [Dental practice valuation: the three common methodsValuation professionals commonly use three approaches: income, market and asset. The IRS says all three should be considered and judgment used to choose among them. The ADA suggests a valuator who specializes in dental practices. This post explains terms only and gives no price or multiple.](https://joncopeland.multisites.ai/blog/dental-practice-valuation-methods) - [Selling a dental practice: timeline, taxes and transitionSelling a dental practice involves planning, a team of advisers, organized records, a contract, tax reporting and a patient transition. The ADA says a listing-to-closing timeframe of four to six weeks is a general rule of thumb, though real deals vary. Start early and involve an attorney and a CPA. This is education, not advice.](https://joncopeland.multisites.ai/guides/selling-a-dental-practice) - [Buying a dental practice: steps, financing and due diligenceBuying a dental practice usually runs in six stages: define your goals, get financing, value the practice, sign a letter of intent, complete due diligence, and close. Lenders, attorneys and accountants each own part of the work. This guide explains the steps and lists questions to ask. It is not legal, tax or financial advice.](https://joncopeland.multisites.ai/guides/buying-a-dental-practice) - [Dental practice compliance checklist: OSHA, HIPAA and infection controlA dental compliance checklist covers three federal areas: OSHA workplace safety, HIPAA privacy and security, and CDC infection control. OSHA has no dentistry-specific standard but applies general industry standards such as bloodborne pathogens. HIPAA covers patient information. Use the checklist to organize questions, then confirm requirements with your own advisers.](https://joncopeland.multisites.ai/guides/dental-compliance-checklist) - [Dental practice consulting: what consultants do and how to choose oneA dental practice consultant is an outside professional who reviews how a practice runs and helps the owner fix specific problems, such as scheduling, finances, team systems, insurance or a transition. Choose by matching the consultant's focus to your problem, then check references, scope, and how results are measured.](https://joncopeland.multisites.ai/guides/dental-practice-consulting) ## Talk with Dr. Copeland [Contact Dr. Copeland](https://joncopeland.multisites.ai/contact)[Email](mailto:drcopeland@joncopelanddds.com)