Discovery Call

Dental Practice Valuations: Top Three Valuation Drivers

The Angle: Think Like a Buyer, Prepare Like a CEO

Selling a dental practice isn’t a handoff—it’s a strategy. The most successful transitions don’t start with a “For Sale” sign. They begin months (sometimes years) in advance, with clean financials, operational upgrades, and a mindset shift: viewing your practice not as a job, but as a business. One that a buyer can step into and grow.

Let’s break down the top three valuation drivers that matter most.

Valuation Driver #1: Active Patient Base – The Real Engine of Value

Your active patient count—defined as patients seen within the last 18 months—is the first number any serious buyer will ask about. Why? Because those patients represent recurring revenue, brand loyalty, and growth momentum.

📊 Target Benchmarks:

  • 2,000+ active patients = full-time, bankable practice
  • 400 active patients = 1 doctor day/week

For example, a practice with 1,600 active patients supports four doctor days—an important figure when projecting buyer income and scheduling capacity.

✅ Prep Checklist:

  • Run an 18-month patient count report
  • Remove inactive or one-time visits
  • Segment by hygiene, restorative, and specialty
  • If under 2,000, initiate reactivation campaigns

🔥 Power Play: Start recall campaigns at least 6 months before listing. Adding 300 active patients can boost value by $200K–$300K.

Valuation Driver #2: Revenue Per Patient – Projecting Growth Potential

Your annual revenue per active patient reveals two critical insights:

  1. How effectively you’ve monetized your patient base
  2. How much upside remains for the next owner

💵 Benchmarks:

  • $600 per patient (rural)
  • $700 per patient (urban)

Lower revenue per patient combined with a large patient base signals growth potential. High revenue per patient might suggest saturation—unless new procedures are introduced.

✅ Prep Checklist:

  • Divide total annual collections by active patients
  • Highlight untapped services (implants, ortho, sedation)
  • Frame opportunities clearly in your practice summary

🔦 Case Study:
Dr. Jamie bought a rural practice with 3,000 active patients and $700K in collections—just $233 per patient. Within two years, she doubled collections to $1.4M by expanding hours and adding implants. That low revenue-per-patient metric signaled one thing: runway.

Valuation Driver #3: Profit Margin – The 40% Rule That Sells Practices

Collections might impress. But profit margins close deals. A practice collecting $1M but only netting $200K isn’t attractive to a buyer or lender. Target 40%+ net income after expenses.

💡 Basic Profit Formula:

  • Collections – Operating Expenses = Net Income

Many sellers run personal expenses (e.g., car leases, spouse payroll, one-time renovations) through the business. These need to be “normalized” before listing to show true profitability.

✅ Prep Checklist:

  • Compile two years of P&Ls
  • Identify personal/non-recurring expenses
  • Build a Seller’s Discretionary Earnings (SDE) report
  • Aim for adjusted net income of 40%+ of collections

📚 Real-Life Example:
One seller listed at $850K with $275K in net income (27.5%). After normalizing $150K in add-backs—spouse’s salary, inflated rent, and legal fees—the true earnings hit $425K. Suddenly, the practice became bankable.

💼 Pro Tip: Create a clean, professional “Transition Dossier” that includes your active patients, collections, normalized profit, and growth story. It builds trust and positions you as a savvy, seller-ready CEO.

Closing Thoughts: Don’t Sell a Practice—Sell a Platform

Buyers aren’t just purchasing equipment and earnings—they’re investing in a platform they can build upon. Your job isn’t to hand over a checklist. It’s to present a business with momentum, systems, loyal patients, and room to grow.

By focusing on the top three valuation drivers—active patient count, revenue per patient, and normalized profit—you position your practice not just to sell, but to command top dollar.

And more importantly? You walk away on your terms—with your legacy intact, and your next chapter fully funded.

📚 Want the Full Blueprint?
If this guide helped, you’ll love the full playbook inside Dentist to CEO. Backed by real case studies and checklists, it walks you through buying, building, and selling a thriving dental business. Whether you’re an associate aiming for ownership or a veteran prepping to sell, this book will give you the confidence and tools to lead like a CEO.