The basics

EBITDA is earnings before interest, taxes, depreciation and amortization. Strip those out and you see what the practice earns from running the business itself.

Adjusted EBITDA

Adjusted EBITDA cleans the number up for a new owner:

  • Add back personal and one-time expenses.
  • Price the owner's dentistry at a market associate rate.
  • Reset rent to market if you're your own landlord.
Illustrative example
Reported EBITDA
$210K
Personal and one-time add-backs
+ $45K
Owner dentistry above market rate
+ $45K
Adjusted EBITDA
$300K

For illustration only.

Why banks care

Lenders use it to judge whether a practice can carry its loan and still pay the new owner. It's a genuine health check.

Why it's easy to bend

There's no single rulebook for add-backs. One firm counts a conference trip as personal; another doesn't. One prices associate dentistry high; another low. Same books, different answers, sometimes tens of thousands of dollars apart.

Ask anyone quoting you EBITDA

Which add-backs did you make, and why? Can I see the paper trail for each one? If the answer isn't clear, neither is the number.

What it doesn't tell you

EBITDA shows health. It doesn't show whether patients will stay, whether the team will stay, or how the practice is seen in its community. That's goodwill, and it's where the real value lives. Read more →