EBITDA – What Does It Mean, and Why Is It So Important?

EBITDA as an acronym stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It’s a financial metric used to measure a company’s operating performance, essentially showing how much profit a business generates from its core operations before accounting for certain expenses like interest payments, taxes, or the cost of physical assets (depreciation) and intangible assets (amortisation).

Why is EBITDA important for practice owners?

We use EBITDA to measure the profitability of dental practices, as it removes factors that might vary widely from practice to practice, like debt levels and travel expenses. So, EBITDA is useful for understanding how well a company is performing at its core, without the noise of other financial factors.

The EBITDA figure plays a significant role in determining the value of a dental practice, and maximising this figure is key to achieving the highest possible sale price. For sellers, carefully managing costs and maintaining a strong EBITDA margin is essential for preserving value.

 

Why is EBITDA important when looking to buy a dental practice?

For buyers, EBITDA serves as a valuable benchmark, offering insight into the profitability of the practice. As agents, we believe it provides a useful indication of the potential take-home profit after all expenses are covered, excluding any necessary bank loans.

 

 

Get an up-to-date valuation to help realise the potential in your practice

An expert practice valuation can highlight the areas you need to act on to realise the profit in your practice and get the best price when the time comes to selling. Valuing helps you make a more informed decision of when to sell and can helps set realistic expectations for what your practice may be worth, the likely buyer type and any post-sale obligations you may face.

Book a valuation here or contact us to have a confidential chat about your dental practice.