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).
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?
Dental practices sell for 5x to 8x EBITDA for single-location and add-on acquisitions, 9x to 11x for multi-location regional groups, and up to 12x for $5M+ EBITDA platform deals. The single biggest driver is scale: scale tier matters more than specialty.
What is the average EBITDA multiple for PT clinics?
Physical therapy clinics typically sell for 5x to 7x EBITDA for single-location and add-on acquisitions, and 7x to 9x EBITDA for multi-location platforms with $1M+ in EBITDA.
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. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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