Mind the gap – EBITDA explained

To illustrate the stakes: take the average practice turning over $1.5 million. If your adjusted EBITDA sits at $150,000 and a buyer applies a 3.0x multiple, your practice is worth $450,000. Now take the same turnover, but you've done the hard work on margins and your adjusted EBITDA is $300,000. At a 4.5x multiple, your practice is worth $1.35 million. Same turnover, $900,000 difference. Understanding and leveraging that gap is the whole point of this article.

There are two levers that drive your sale price: profitability and multiple. Profitability is assessed over three years. The size of the multiple reflects the quality of your business. Neither moves quickly – which is why starting early is key.

What moves the multiple

Up to 20 factors can influence where your practice lands in the 3.0x to 4.5x multiple range. Some you can't influence – the economy, interest rates, buyer demand in your area – but most are within your control.

Consistency of earnings. Three years of stable or growing EBITDA are worth more than a great single year. Buyers and their banks price uncertainty, so variability in your results, even if there's a perfectly good explanation, can drag your multiple down. Get on top of the root causes early and give your financials time to tell a clean story.

Owner dependence. This is the big one. If you are the primary clinician, decision-maker and face of the practice, a buyer is purchasing a business that only works while you show up. That's a risk and it's priced as one. To reduce owner dependency, you need associate clinicians who have built relationships with your patients, a practice manager who runs the day-to-day and systems that operate independently of you. If you have multiple working owners and few employees, this can compound the issue. Start building that team now.

Adjusted EBITDA margin. Above 20% is where you want to be. Consistently. Every percentage point of improvement flows straight into your sale price – multiplied. A 2% margin gain on a $1.5 million practice is $30,000 more profit annually. At a 4.0 multiple, that's $120,000 more on your sale price. The big levers are the same ones covered in my first article – wages and gross profit margin.

Team stability and tenure. An experienced team – not including working owners – with long tenure is one of the most underrated indicators of practice quality and it's worth understanding why it matters. Staff who have been with the practice for several years have built their own patient relationships, developed deep clinical knowledge and become part of the fabric of the business. That continuity is genuine goodwill – it demonstrates that patients have a connection to the practice and its people, not just to you. Low staff turnover also signals a well-led, stable workplace that a buyer can inherit with confidence. Ensure your team is properly contracted with clear employment agreements; tidy documentation reduces due diligence friction and reinforces the impression of a professionally run practice.

Lease security. Short leases, uncertain renewal terms, unpredictable rent reviews, or a difficult landlord relationship all suppress multiples. If your lease is coming up for renewal, negotiate a long, stable term with right of renewal options now.

Capital expenditure. Buyers borrow to buy practices. They need cash flow from day one to service that debt. If your equipment is ageing or your fit-out is overdue, a buyer will price that into their valuation. Reinvesting before you sell protects your multiple.

Digital presence and database. Increasingly relevant. A strong Google presence, an active patient database with email addresses, plus online booking all signal a practice that will keep attracting patients under new ownership. A weak digital footprint is just more work for the buyer and it shows in the price.

The practice that does well across all of this commands a strong multiple. It is achievable with deliberate preparation – and the earlier you start, the more levers are available for you to pull. I go into more detail on each of these factors on Ocular Group’s website, including benchmarks and worked examples.

What's next

Understanding how a buyer will value your practice is step one. Actually doing the deal is a different kettle of fish entirely and it’s where many owners, despite having built a great practice, leave money on the table because they didn't understand the process.

In my next column, I'll walk through the sale process from the first conversation to settlement. Then, in the final article in this series, we'll cover the part nobody warns you about: what happens after the keys are handed over.

The takeaways

• Your sale price is your adjusted EBITDA multiplied by a factor typically between 3.0 and 4.0, with 4.5 reserved for exceptional practices. On identical turnover, the difference between a 10% and a 20% margin practice – at different multiples – could be $900,000.
• The two major levers are profitability and multiple. Neither moves quickly, which is why starting early is the best strategy.
• The factors that drive your multiple – earnings consistency, owner dependence, team stability, lease security and capital expenditure position – are largely within your control. These, plus a consistent EBITDA margin above 20%, are the clearest markers of an exceptional practice.
• Every percentage point of margin improvement is multiplied at sale. The financial preparation work fundamentally changes the story a buyer sees when they look at your business.

The price of your practice is never just a number. It's the sum of the decisions you've made, the risk a buyer is prepared to take on and the story your financials tell. The owners who understand that – and act on it – are the ones who exit on their own terms.