--- title: "Valuing a Dental Practice: Methods, Inputs and Questions" description: "How to value a dental practice: the methods the SBA lists, the records a valuator needs, why the answer is a range, and what to ask a valuator, CPA or broker." url: https://joncopeland.multisites.ai/guides/valuing-a-dental-practice publisher: Copeland Consulting Services email: drcopeland@joncopelanddds.com contact: https://joncopeland.multisites.ai/contact --- # Valuing a dental practice: methods, inputs and questions to ask A 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. GuideUpdated October 26, 20268 min read 1. 1 ## Methods, not formulas The SBA says there are many different methods to set a fair price for a business and lists five. 2. 2 ## Inputs drive results Financial statements, tax returns, equipment lists, the lease and patient data feed every method. 3. 3 ## Independent beats asking price The ADA suggests a valuator who gives an independent and objective assessment. 4. 4 ## No multiples here This guide quotes no multiple or rule of thumb because none of the sources it opened publishes a standard. This guide explains how dental practice valuation works. It comes from Copeland Consulting Services and uses public sources. It is general education. It is not legal, tax or financial advice, and it is not a valuation. A practice value depends on facts that only a qualified valuator can review, so involve a valuator, a CPA and an attorney. It is part of the [dental practice ownership guide](https://joncopeland.multisites.ai/guides/dental-practice-ownership). Buyers should also read the [guide to buying a dental practice](https://joncopeland.multisites.ai/guides/buying-a-dental-practice). Sellers should read the [guide to selling a dental practice](https://joncopeland.multisites.ai/guides/selling-a-dental-practice). ## Why does a practice need a valuation? A valuation gives buyers, sellers and lenders a reasoned estimate of what a practice is worth, so each side can negotiate from the same facts. People ask for one when they plan to sell, buy, buy in, or test a lender’s view. Your attorney and CPA can name other reasons. A listing price or a seller’s hope is not a valuation. Valuations matter more as ownership changes. The ADA Health Policy Institute reports that 73 percent of US dentists owned a practice as of 2023, down from 85 percent in 2005. The HPI brief finds that ownership comes later in a career for newer graduates. Buyers and sellers in any transition need a fair way to set a price. See the [practice ownership trends post](https://joncopeland.multisites.ai/blog/dental-practice-ownership-trends). ## What is the difference between price and value? Value is a reasoned estimate. Price is what a buyer and seller agree to pay. They can differ for many reasons. The ADA notes a similar trade-off on timing: sellers can decide “whether you prefer to accept a lower price for a faster sale or if you’re able to allow more time in order to reach a broader market of potential buyers.” A valuation gives you a starting point. Your negotiation decides the price. ## What methods do valuators use? The SBA says, “There are many different methods to determine a fair price for the sale of the business.” It lists five. They apply to any small business, including a dental office. A valuator may use one or blend several. Method (SBA name) SBA description What it mainly needs Capitalized earning approach “refers to the return on the investment that the investor expects” Normalized earnings, and a required return Excess earning method Like the capitalized earning method, but it separates return on assets from other earnings Earnings, asset values, and a return rate for the assets Cash flow method “typically used to determine how much of a loan the business’ cash flow can support” Cash flow after expenses, and loan terms Tangible assets (balance sheet) method Values the business by its tangible assets Equipment, supplies and other asset values Value of specific intangible assets method Compares buying a wanted intangible asset versus creating it A list of intangibles, and what it would cost to build them The table uses the SBA’s own words in quotation marks. For plain-language entries on related approaches, see the glossary pages on the [income approach](https://joncopeland.multisites.ai/glossary/income-approach), the [market approach](https://joncopeland.multisites.ai/glossary/market-approach) and the [cost approach](https://joncopeland.multisites.ai/glossary/cost-approach). The [post on valuation methods](https://joncopeland.multisites.ai/blog/dental-practice-valuation-methods) goes deeper on how they compare. ### What do the methods tell you? Each method asks a different question. - **Earnings-based methods** ask what the practice earns and what return a buyer needs. They depend heavily on how earnings are measured and adjusted. - **Cash flow method** asks how much debt the practice can support. This matters to lenders. - **Asset method** asks what the equipment and other tangible items are worth. It leaves out value tied to patients and reputation unless added another way. - **Intangible asset method** asks what a specific intangible would cost to create. It fits when a buyer wants one particular asset. No method is correct for every practice. A valuator should explain why a method fits yours. ## What does a valuator need from the practice? Every method starts with records. The ADA’s seller tip sheet lists documents a practice should prepare, and a valuator will usually ask for the same kinds of items. Treat this table as a starting list. A valuator will give you its own. Area Items Financial Practice accounts, financial statements, balance sheets, federal tax returns People Staff employment contracts, job descriptions, staffing expense report Equipment Inventory with brand, model, serial number, year, maintenance and repair history Facility Lease or mortgage, upgrades, landlord terms Compliance Documents showing compliance with federal, state and local rules Patient data Number of active patients, dentist and hygiene production, hours worked, accounts receivable, new patients per month and referral sources, case acceptance rate, percentage of recare scheduled, collection rate, fee-for-service to managed care ratio Make sure the records are complete and consistent. A valuator will compare statements, tax returns and the practice management system. Gaps invite questions and slow a sale. ### Key measures to understand These measures appear in most valuation reports. Know what each one means before you read the report. - [Production](https://joncopeland.multisites.ai/glossary/production) is the total amount billed at the practice’s fee schedule. [Collections](https://joncopeland.multisites.ai/glossary/collections) is the money actually received. Confirm which one a figure uses. See the [production versus collections post](https://joncopeland.multisites.ai/blog/dental-production-vs-collections). - [EBITDA](https://joncopeland.multisites.ai/glossary/ebitda) is a measure of earnings, and [adjusted EBITDA](https://joncopeland.multisites.ai/glossary/adjusted-ebitda) changes it for items the valuator treats as one-time or owner-specific. Ask the valuator to list every adjustment and the reason for it. See the [EBITDA post](https://joncopeland.multisites.ai/blog/ebitda-dental-practice-sale). - [Overhead](https://joncopeland.multisites.ai/glossary/overhead) shows how much of revenue goes to running costs. See the [overhead percentage post](https://joncopeland.multisites.ai/blog/dental-practice-overhead-percentage). - [Accounts receivable](https://joncopeland.multisites.ai/glossary/accounts-receivable) is money owed to the practice. Ask how a sale treats it. - [Goodwill](https://joncopeland.multisites.ai/glossary/goodwill) is value beyond tangible assets. It matters for taxes, as the next section shows. For measures used in operations, the [KPI guide](https://joncopeland.multisites.ai/guides/dental-practice-kpis-and-benchmarks) explains how to track them. ## How does goodwill affect taxes in a sale? In a sale of a business’s assets, the purchase price is divided among asset types, and that division affects both parties’ taxes. The IRS says, “Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale” when goodwill or going concern value attaches to the assets. The Form 8594 instructions add, “An allocation of the purchase price must be made to determine the purchaser’s basis in each acquired asset and the seller’s gain or loss on the transfer of each asset.” They list asset classes and say the allocation follows an order: remaining consideration goes to classes in a set order, and goodwill and going concern value fall in the last class, Class VII. This guide does not say how to allocate in a given deal. That is tax advice. Ask a CPA how an [asset sale](https://joncopeland.multisites.ai/glossary/asset-sale) would be treated for you, and ask your attorney how the contract describes the allocation. ## What drives a valuation up or down? The sources opened for this guide do not rank value drivers or give numbers for them. These are questions a valuator or buyer may raise, framed so you can test your own practice. Do not read any item as a promise of a higher value. Topic Question a valuator or buyer may ask Earnings How steady are earnings, and what adjustments were made? Patient base How many active patients, and how many new patients arrive each month? Payer mix How much revenue depends on insurance contracts, and what do they pay? Owner dependence How much of the production comes from the selling dentist? Team Will the staff stay after a sale? Facility and equipment What condition is the equipment in, and what are the lease terms? Records and systems Are records complete, and are routines written down? The ADA’s materials list a topic called “15 Ways to Increase Practice Value ASAP” in its transitions videos. This guide cannot say what those ways are because it did not open the video. Look for the ADA resource if you want its view. ## Why does this guide give no multiples or rules of thumb? Some people quote multiples of collections or earnings, or short numeric rules, as ways to value a practice. This guide quotes none. No source opened for this guide publishes a standard that supports them. A single number also hides the method and the inputs. If someone gives you a multiple, ask these questions: 1. Who published it, and in what year? 2. What does it multiply: collections, production, earnings, or something else? 3. Which practices and which time period does it cover? 4. What was left out, such as real estate, equipment or accounts receivable? A valuator’s report should show the method, the data and the assumptions, so you can see how it reached the number. See the [valuation multiple](https://joncopeland.multisites.ai/glossary/valuation-multiple) entry for what the term means. ## How do you choose a valuator and review the report? The ADA advises assembling a team of professionals for a sale. It lists a valuator “to assist in developing an independent and objective assessment regarding the actual worth of the practice, the patient population, equipment and, if applicable, real estate.” It adds that you may want one who specializes in dental practices. Questions to ask before you hire: - How many dental practices have you valued, and how recently? - Which methods will you use, and why? - What records do you need, and how long will the work take? - How are you paid, and does your fee depend on the result? - Will the report be written, and will it show assumptions and adjustments? - Do you also act as a broker or lender? If so, how do you handle that conflict? Questions to ask once you have the report: 1. What range did you reach, and what drives the low and high ends? 2. Which adjustments did you make to earnings, and why? 3. What would change the value, such as a change in payer contracts or staff? 4. What does the report include for equipment, real estate and accounts receivable? 5. How would a sale price split among asset types, for tax reporting? Take the answers to your CPA and your attorney. ### Who else is on the team? The ADA lists other professionals for a sale. Each one answers a different question. Use this table to decide whom to call first. Adviser What the ADA says the role covers Valuator An independent and objective assessment of the practice’s worth Attorney Helps ensure the process and contracts comply with applicable laws, and may help collect outstanding debts before a sale Accountant Can help with sale-related tax opportunities, such as appraising equipment that might enable a tax credit Financial adviser Helps assess how to invest the proceeds of a sale Broker Promotes and lists the practice, and may help obtain a real estate appraisal Ask every adviser how they are paid. Then check whether anyone gains more if the price goes up or down. The [selling guide](https://joncopeland.multisites.ai/guides/selling-a-dental-practice) covers the seller’s side in more detail. ## Next step For the full ownership picture, read the [dental practice ownership guide](https://joncopeland.multisites.ai/guides/dental-practice-ownership). To ask about practice ownership, contact 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 ### How do you value a dental practice? A valuator picks one or more methods, collects the practice's records, adjusts the numbers for one-time or owner-specific items, and reports a value or range. The SBA lists capitalized earning, excess earning, cash flow, tangible asset, and specific intangible asset methods. Each method answers a slightly different question about worth. ### What is a good rule of thumb for valuing a dental practice? This guide does not give one. No source this guide opened publishes a standard that supports a single rule, and a rule ignores location, payer mix, equipment, lease, staff and the seller's role. Ask a dental practice valuator for a written report that shows the method, the inputs and the assumptions. ### What documents does a valuator need? The ADA lists practice accounts, financial statements, balance sheets and federal tax returns. It also lists staff contracts, an equipment inventory, the lease and patient data such as active patients, production, collections, new patients per month and case acceptance. Ask the valuator for its exact request list. ### Who should value my practice? The ADA suggests a dental practice valuator who gives an independent and objective view, and says you may want one who specializes in dental practices. A broker, an accountant and an attorney help with other parts of a sale. Ask each how they are paid so you know their incentives. ### What is goodwill in a dental practice? Goodwill is value beyond a business's individual assets. In a sale of assets, the price is divided among asset classes, and the IRS puts goodwill and going concern value in the last one, Class VII. The split affects taxes, so ask a CPA how it applies to your deal. ## Terms on this page - [Accounts receivable](https://joncopeland.multisites.ai/glossary/accounts-receivable) - [Overhead percentage](https://joncopeland.multisites.ai/glossary/overhead-percentage) - [Practice ownership](https://joncopeland.multisites.ai/glossary/practice-ownership) - [Practice valuation](https://joncopeland.multisites.ai/glossary/practice-valuation) - [Valuation multiple](https://joncopeland.multisites.ai/glossary/valuation-multiple) - [Adjusted EBITDA](https://joncopeland.multisites.ai/glossary/adjusted-ebitda) - [Case acceptance](https://joncopeland.multisites.ai/glossary/case-acceptance) - [Income approach](https://joncopeland.multisites.ai/glossary/income-approach) - [Market approach](https://joncopeland.multisites.ai/glossary/market-approach) - [Balance sheet](https://joncopeland.multisites.ai/glossary/balance-sheet) ## Sources 1. [SBA: Plan your business (buy an existing business or franchise)](https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan) 2. [ADA: What to Do When Selling a Practice](https://www.ada.org/resources/practice/practice-management/what-to-do-when-selling-a-practice) 3. [IRS: About Form 8594, Asset Acquisition Statement Under Section 1060](https://www.irs.gov/forms-pubs/about-form-8594) 4. [IRS: Instructions for Form 8594](https://www.irs.gov/pub/irs-pdf/i8594.pdf) 5. [ADA Health Policy Institute: Practice Ownership Trends in Dentistry, a New Look at Old Data (June 2025)](https://www.ada.org/-/media/project/ada-organization/ada/ada-org/files/resources/research/hpi/practice_ownership_trends_dentistry_new_look_old_data.pdf) 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 - [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) - [Dental practice ownership: buying, starting, valuing, selling, associates and DSOsDentists reach ownership by starting a practice, buying one, buying in as a partner, or working as an associate or for a DSO first. ADA data show 73 percent of dentists owned a practice in 2023, down from 85 percent in 2005. Each path needs an attorney, a CPA and often a lender or broker.](https://joncopeland.multisites.ai/guides/dental-practice-ownership) - [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 KPIs and benchmarks: formulas, sources and limitsA dental practice KPI is a number the team tracks on a schedule, such as collections, overhead percentage, no-show rate or case acceptance. Few KPIs have an official benchmark. The ADA publishes survey averages for income and billings. Most other benchmarks online come from vendors, and formulas differ, so compare your own trend first.](https://joncopeland.multisites.ai/guides/dental-practice-kpis-and-benchmarks) - [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) - [What is EBITDA in a dental practice sale? A plain guideEBITDA 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.](https://joncopeland.multisites.ai/blog/ebitda-dental-practice-sale) ## Talk with Dr. Copeland [Contact Dr. Copeland](https://joncopeland.multisites.ai/contact)[Email](mailto:drcopeland@joncopelanddds.com)