The New Reality of Dental Practice Valuations: What Every Owner Needs to Know

The dental industry is changing faster than most practice owners realize. For years, selling a practice meant finding a local colleague, negotiating a fair price, and handing over the keys. But the rise of dental support organizations (DSOs) and private equity has turned practice sales into a high-stakes marketplace where valuations, deal structures, and even career trajectories can look completely different depending on which path an owner chooses.

Recently, Brannon Moncrief — CEO of McLaren & Associates and a veteran advisor in dental mergers and acquisitions — shared candid insights on what really drives value in today’s deals. His perspective highlights not only how dentists should think about selling, but also how they should think about building their practices in the first place.

EBITDA: The Real Driver Behind the Numbers

One of the biggest myths in dental sales is that practice value is tied mainly to revenue. In reality, as Moncrief emphasized, EBITDA (earnings before interest, taxes, depreciation, and amortization) is the true metric buyers care about.

Private dentists looking to acquire typically pay based on collections, but DSOs and private equity firms zero in on profitability. Every extra dollar of EBITDA can be worth seven to ten dollars in valuation. That means lean operations, strong margins, and disciplined compensation structures matter more than flashy top-line numbers.

But it’s not just about the raw figure — it’s about how it’s calculated. Moncrief warns that EBITDA is often manipulated or misunderstood, with buyers eager to present lower numbers to justify lower offers. Without experienced advisors managing that narrative, practice owners risk leaving millions on the table.

The Threshold That Changes Everything

For solo or smaller group practices, there’s a tipping point where the buyer pool shifts dramatically.

• Below ~$2M in revenue and ~$500K EBITDA → the likely buyers are other clinicians. Valuations in this world tend to hover in predictable ranges, often tied loosely to collections.
• Above ~$2M revenue/$500K EBITDA → the buyer pool opens to DSOs and private equity groups. Here, valuations can quickly outpace what private buyers would ever be able to pay.

This threshold matters because it changes not just the size of the offers, but also the expectations around post-sale commitments, leadership roles, and growth potential.

Private Equity vs. DSOs: Two Very Different Paths

When an owner crosses into the larger-scale arena, they face a fundamental choice:

• Sell to a strategic buyer (DSO): These organizations already have infrastructure in place. They typically offer a lower multiple but apply it to a higher EBITDA figure since they don’t need your systems to run.
• Sell to private equity: In this case, your practice becomes the “platform investment.” Private equity firms use your infrastructure as a launchpad to grow, which means they may offer a higher multiple, but on a normalized or adjusted EBITDA that accounts for the costs of building out systems.

Both paths can yield similar final valuations, but the strategic implications differ. DSOs may integrate you more tightly into their existing operations. Private equity, on the other hand, often requires a longer-term leadership commitment since they’re betting on you to drive growth.

The Post-Sale Reality: Commitments and Equity

Gone are the days of selling and walking away in two years. Most deals today require three to five years of post-sale involvement. Even if an owner steps back clinically, they’re often expected to stay engaged in leadership or management.

Another shift is the move toward joint venture models. Instead of taking all cash and trading the rest for parent-company stock, many deals now leave the owner with retained equity in their own practice. This alignment of incentives ensures owners stay invested in the ongoing performance of their practice, not just the broader DSO portfolio.

For dentists, this structure offers both security and risk. It ties them to the continued success of their practice but also gives them a clearer path to benefit from a second “bite of the apple” during recapitalization events.

Building with the End in Mind

So what makes a practice especially attractive to buyers? Moncrief outlined several key factors:

• EBITDA sweet spot: Between $1M and $5M, with the broadest demand emerging above $2M.
• Margins: Healthy 20–25% EBITDA margins show efficiency without appearing unsustainable.
• Provider mix: Reduced reliance on one key dentist lowers risk.
• Geographic density: Groups clustered within a reasonable radius are far more appealing than scattered locations across states.
• Reputation: Hundreds of positive Google reviews and strong branding can meaningfully influence buyer interest.

Perhaps most importantly, intentional growth matters. Expanding too quickly, over-investing in infrastructure, or building a C-suite prematurely can erode margins and actually decrease valuation. Sustainable, strategic scaling beats aggressive expansion every time.

Market Headwinds and Emerging Trends

The broader economic climate also plays a role. Rising interest rates and tighter capital markets have cooled demand for ultra-large deals (over $5M EBITDA), compressing valuations at the top end. Recap cycles — once targeted at three to five years — now often stretch to five to seven.

This means mid-sized practices in that $1–5M EBITDA range are in a “sweet spot” with both strategic and private equity buyers. But the window won’t stay static forever. Owners who understand where they sit in the market cycle can time their sales more effectively.

Final Thoughts: Intentional Ownership

For dentists, the lesson isn’t just about how to sell — it’s about how to own. Every decision around staffing, compensation, expansion, and leadership ripples forward into valuation.

As Moncrief put it, owners should avoid “flying by the seat of their pants” and instead build with clarity. Whether the goal is to sell in five years, scale to 20 locations, or simply maximize income while retaining independence, intentional strategy is the key.

The dental landscape is consolidating quickly. Those who understand the mechanics of valuation, the differences between buyers, and the importance of EBITDA will be best positioned — not only to achieve a successful exit, but to shape the next era of dentistry.