What does a medical practice valuation cost?
A formal medical practice valuation costs $5,000 to $25,000 depending on practice size, purpose (sale, divorce, partner buy-in, estate), and whether you need a calculation engagement (lower cost, narrower scope) or a full opinion of value (higher cost, defensible in court).
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Definition
A practice valuation is a written estimate of fair market value prepared by a credentialed appraiser for sale, partner buy-in, divorce, estate, or financing purposes.
The detail
The American Society of Appraisers and NACVA define three engagement levels that drive cost. A calculation engagement uses limited procedures and runs $3,500 to $8,000. A summary valuation report runs $7,500 to $15,000. A full conclusion of value with a detailed report runs $15,000 to $40,000 and is required for litigation, IRS filings, and most fairness opinions. Healthcare adds complexity because of Stark and Anti-Kickback fair market value requirements, which often force the use of a healthcare-specialized appraiser at the upper end of the range. For a typical $3M to $10M outpatient clinic, expect $8,000 to $18,000 for a defensible report you can use in a partner transaction or third-party sale process. Less formal opinions of value from M&A advisors or fractional CFOs can be much cheaper but should not be substituted for a written appraisal in regulated contexts.
NACVA and ASA recognize three engagement levels: calculation, summary, and conclusion of value.
Source: NACVA Professional Standards
Stark Law and Anti-Kickback Statute compliance requires fair market value documentation for most physician compensation arrangements.
Source: CMS Stark Law
Most healthcare practice valuations use three approaches: income, market, and asset-based.
Source: AICPA SSVS No. 1
What this means for clinic owners
From Sorso
If you are within three years of selling, get a baseline valuation now. The $10,000 you spend identifies value drivers and add-back opportunities that typically move the final purchase price by 5 to 15 percent. That ROI is hard to match anywhere else in the business.
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What is the average EBITDA multiple for dental practices?
FOCUS Investment Banking publishes a ladder by adjusted EBITDA with the buyer type named on each rung: under $1M at 5–7×, $1M to $3M at 7–9×, $3M to $5M at 9–11×, and $5M+ at 11×+ in select cases. McLerran & Associates puts platform-grade groups above $5M in adjusted EBITDA at 10x to 12x or more and leaves its lower tiers unnumbered. Neither firm publishes an absolute multiple for orthodontics, oral surgery or pediatric dentistry; McLerran says only that specialty practices run roughly 1 to 3 additional turns of EBITDA above general dentistry at the same size tier. Scale, not clinical quality, is what moves you up the ladder.
What is the average EBITDA multiple for PT clinics?
Breakwater M&A publishes physical therapy (physiotherapy) multiples by adjusted EBITDA: $150K to $500K at 2.5–4x for a single owner-operated location, $500K to $1M at 4–6x once a professional manager is in place, $1M to $3M at 5–7x for a platform practice with a regional footprint, and $3M+ at 6–8x+ for a roll-up target. It sums the whole market up as "2.5x to 8x EBITDA" in 2026. Peak Business Valuation states 3.0x to 6.0x with no size breakdown behind it, so read that as a cross-check on the middle of Breakwater's ladder rather than a band for any one clinic size.
What are EBITDA add-backs in practice valuation?
EBITDA add-backs are non-recurring or owner-related expenses added back to reported EBITDA to show normalized earnings, typically increasing reported EBITDA by 10 to 30 percent in owner-operated practices.
What is the difference between accrual and cash accounting for clinics?
Cash accounting recognizes revenue when payment is received and expenses when paid; accrual accounting recognizes revenue when services are performed and expenses when incurred. Most clinics under $30M revenue can use cash; larger groups and those preparing for sale typically need accrual.
What is a quality of earnings report?
A quality of earnings (QoE) report is a buyer-commissioned financial due diligence analysis that normalizes EBITDA, tests the reliability of revenue and expenses, and identifies risks that affect purchase price, typically costing $50K to $150K for a healthcare practice.
How long does it take to sell a medical practice?
Selling a medical practice to a PE buyer typically takes 6 to 12 months from engagement to close, with 2 to 3 months of prep, 1 to 2 months of marketing, 2 to 3 months of diligence and negotiation, and 1 to 2 months for definitive documents and closing.
What is a data room in healthcare M&A?
A data room is the secure online repository where a seller uploads financial, legal, clinical, and operational documents for buyer diligence, typically containing 500 to 2,000 files organized across 15 to 25 top-level categories.
How do medical and dental practice partnership buy-ins typically work?
A practice partnership buy-in is the structured purchase of an equity stake by an associate from existing owners, typically priced as a pro-rata share of fair market value (tangible assets plus goodwill) and financed over 3 to 7 years through a combination of cash, seller note, and reduced compensation. The mechanics vary widely by specialty but the underwriting questions are the same: what is the practice worth, what are you buying, and how does the cash flow service the debt.
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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