What Is EBITDA and Why Should Dentists Care?
If you’re a dentist running a practice, you’ve probably heard the term EBITDA tossed around, especially when it comes to practice valuation or financial benchmarking. But what does it mean, and why should it matter to you?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.
It’s a standard financial metric used to evaluate a business’s profitability, especially when comparing practices or preparing to sell. For dentists, it offers a clearer picture of operational performance without the noise of financing or tax strategies.
Breaking Down EBITDA in Simple Terms
Let’s say you’re reviewing your practice’s annual numbers and trying to understand how profitable it is. EBITDA helps isolate the core business operations by stripping out variables that don’t directly relate to day-to-day performance.
Here’s how it works:
- Earnings: Your net income or bottom line
- Interest: Removed because it depends on how you finance the business
- Taxes: Excluded because they vary based on location and structure
- Depreciation and Amortization: Non-cash expenses that relate to past purchases or intangible assets
By removing these, EBITDA gives you a cleaner view of how well your practice is generating income from actual dental services.
Why EBITDA Matters in a Dental Practice
1. Valuation During Sale or Acquisition
When buyers look at a dental practice, EBITDA is often the first number they want to see. It helps them understand how much profit the practice produces before adding in their own financing or tax approach. A higher EBITDA often leads to a higher valuation multiple and a better sale price.
2. Comparing Performance Over Time
If you’re planning to grow, bring on associates, or open a second location, EBITDA lets you track your progress in a standardized way. It removes noise from your books and focuses on actual profitability.
3. Benchmarking Against Other Practices
Curious how your practice stacks up against others in your region or specialty? EBITDA allows for apples-to-apples comparisons, helping you spot gaps and opportunities for improvement.
A Real Example From the Field
We worked with a pediatric dentist who assumed her practice was running at a high profit margin. After calculating her EBITDA, we discovered that while collections were strong, overhead costs were eating away at her operational earnings. By adjusting staffing ratios and renegotiating vendor contracts, we boosted her EBITDA by nearly 25 percent over twelve months. That increase had a direct impact on the future sale value of her practice.
How Dental CPAs Can Help You Maximize EBITDA
We don’t just hand you a number, we show you what’s behind it.
Our team works with dental practices across the country to analyze financials, identify operational inefficiencies, and plan strategically for growth or transition.
We understand the nuances of the dental industry, from insurance reimbursements to chair productivity. Whether you’re planning a sale, acquiring another office, or want to boost profitability, we can help make sense of your numbers and drive real results.
Ready to See How Strong Your EBITDA Really Is?
Let’s break it down together.
Contact Dental CPAs today to schedule a free discovery call. We’ll help you understand your EBITDA, benchmark it properly, and take strategic steps to grow your dental practice with confidence.
Call us at 410-453-5500 or use our Contact form to get started.