What Is a Medical Practice Worth?

Most independent medical practices sell for roughly 2.0x to 3.6x Seller's Discretionary Earnings. Specialties with ancillary revenue and employed providers sit toward the top of that band. Practices above roughly $1M in EBITDA typically attract private equity and reprice onto an EBITDA multiple in the 4.0x to 6.5x range.

It depends on the state. Many states enforce corporate practice of medicine doctrines that restrict ownership to licensed physicians, which is why private equity buyers typically use a management services organization structure rather than owning the clinical entity directly.

Considerably. Two practices with identical patient volume can differ by 30% or more in collections depending on the commercial-to-government payer ratio. Buyers underwrite collections, not visits.

There is no single average, because price tracks earnings rather than revenue. At the midpoint multiple of 2.8x SDE, medical practices at $500,000 of SDE sell around $1,400,000, and at $1,000,000 of SDE around $2,800,000. Typical SDE margin in this category runs near 18% of revenue, so a medical practice doing $1,000,000 in revenue would often carry about $180,000 of SDE and land near $504,000.

Take your Seller's Discretionary Earnings and multiply by 2.0x to 3.6x. Where you land inside that band is decided by owner dependence, customer concentration, recurring revenue and the quality of your books. A medical practice at the top of the range looks materially different from one at the bottom, and most of those differences can be improved in the twelve months before a sale.

SDE multiples of 2.0x to 3.6x apply to owner-operated medical practices. Once earnings pass roughly $1M to $2M of EBITDA the buyer pool shifts to private equity and strategic acquirers, and pricing restates onto an EBITDA multiple of 4x to 6.5x. The two are not comparable: SDE includes the owner's compensation and EBITDA does not, so the same business shows a higher SDE multiple than EBITDA multiple.

Typically 9 to 12 months from going to market to closing, assuming financials are ready. Credentialing and payer contract assignment take longer than any other step and cannot be compressed. Start the transfer paperwork the moment an LOI is signed, not at closing.

There is no formula unique to medical practices. The method is the same one used across small business sales: recast earnings into Seller's Discretionary Earnings, then multiply by the industry band, which for medical practices is 2.0x to 3.6x. Three valuation methods exist in principle. The income approach, applying a multiple to earnings, is what nearly every real transaction uses. The market approach compares against recorded sales of similar businesses and works as a cross-check. The asset approach values equipment and inventory and generally sets a floor rather than a price.

Yes. The calculator on this page applies the same 2.0x to 3.6x band used throughout this guide, adjusted for owner dependence, margin quality and business age. It takes five inputs and returns a market range rather than a single figure, because real transaction prices move with deal structure and buyer type.

A market valuation estimates what a buyer would likely pay and is what you need to decide whether to sell. A formal appraisal is a certified document prepared to a defined standard, and is normally required only for litigation, divorce, estate and tax matters, or an SBA loan on the buyer's side. For planning an exit, a market valuation is the right instrument and is far cheaper.