What Is My Dental Practice Worth?
A working guide to how Arizona dental practices are valued in 2026 — the methods, the multiples, and the details that move your number by six figures.
The Short Answer
Most single-location Arizona general practices sell in the range of 60% to 85% of annual collections. A practice collecting $1,000,000 a year typically lands somewhere between $600,000 and $850,000.
That is a $250,000 spread on the same top line. Where a specific practice falls inside it is decided by profitability, hygiene production, the lease, the equipment, and how transferable the patient base is without the current owner. Those five things are the whole game.
What This Guide Covers
- The three methods buyers and lenders actually use
- Typical value ranges by practice profile
- The nine factors that move your number
- Worked example: three practices, identical collections, very different prices
- Adjusted EBITDA, and why your tax return understates your practice
- What quietly lowers your value
- When to get valued
- How Karl values an Arizona practice
- Frequently asked questions
Every dentist who calls Karl Frye asks some version of the same question in the first five minutes. It is the right question. But the honest answer is that a practice does not have one value. It has a value to a particular buyer, financed by a particular lender, under a particular deal structure. A solo dentist buying with an SBA loan and a regional DSO buying with cash will not arrive at the same number for the same practice, and neither of them is wrong.
What follows is the framework Karl uses on Arizona practices, written out plainly. It will not replace a formal valuation. It will tell you roughly where you stand and, more usefully, which parts of your practice are worth fixing before you list.
1. The Three Methods Buyers and Lenders Actually Use
There are a dozen academic valuation approaches. In practice, dental deals get done using three, and often a blend of them. A buyer’s lender will usually run its own version of at least two before approving financing.
| Method | How it works | Typical range | Best suited to | Weakness |
|---|---|---|---|---|
| Percentage of collections | Applies a percentage to the trailing 12 months of collections. | 60% to 85% of collections | Solo and small general practices with stable revenue | Ignores profitability entirely. Two practices with the same collections can have wildly different profit. |
| Adjusted EBITDA multiple | Normalizes owner compensation and personal expenses, then applies a multiple to the resulting earnings. | 4x to 7x for single locations; higher for larger groups | Profitable practices, any practice attracting DSO interest, multi-site | Very sensitive to how the add-backs are calculated. Aggressive add-backs get challenged in diligence. |
| Asset plus goodwill | Values equipment, leaseholds, and supplies at fair market value, then adds goodwill separately. | Goodwill commonly 70% to 85% of total value | Practices with heavy recent equipment investment; allocation for tax purposes | Rarely sets the headline price. Mostly used to allocate the purchase price after the number is agreed. |
Why collections-based pricing persists
Percentage of collections survives because it is fast, and because for a typical solo general practice with normal overhead it lands close enough to the EBITDA answer to be useful. It breaks down badly at the extremes. A practice collecting $1.4M with 78% overhead is worth far less than a practice collecting $900K with 58% overhead, even though the collections rule of thumb would say the opposite. If your overhead is unusual in either direction, insist on an earnings-based valuation.
2. Typical Value Ranges by Practice Profile
The profile of your practice determines which buyer pool competes for it, and the buyer pool determines the price far more than the spreadsheet does. Here is how different Arizona practice profiles generally behave.
| Practice profile | Likely buyer pool | Typical positioning | What moves the needle most |
|---|---|---|---|
| Solo general, $500K to $900K collections | Associate dentists buying their first practice, SBA financed | Lower to middle of the collections range | Clean books, a transferable lease, and whether the buyer can service the debt and still take a salary |
| Solo general, $900K to $1.5M collections | Individual buyers, existing owners adding a second site, smaller DSOs | Middle to upper range; the most competitive segment in Phoenix | Hygiene production percentage and overhead discipline |
| High fee-for-service, low PPO | Individual buyers who want the lifestyle; some DSOs | Premium positioning | How dependent the fee-for-service base is on the selling dentist personally |
| Specialty practice (ortho, oral surgery, perio, endo) | Smaller, specialist-only buyer pool; specialty DSOs | Wide variance; earnings-based valuation is essential | Referral source concentration. A practice fed by three GPs is fragile. |
| Multi-location group, $3M+ collections | DSOs and private-equity-backed platforms | Earnings multiple, typically well above single-site multiples | Whether associates are contracted to stay, and whether management is truly separable from the owner |
| Practice plus the real estate | Buyers who want the building; or the building sold separately to an investor | Two separate valuations, deliberately | Whether the lease written between them is at market rate. An above-market lease to yourself suppresses practice value. |
The last row catches a lot of Arizona owners by surprise. If you own your building and have been paying yourself an above-market rent, that rent is an expense that reduces your practice’s apparent profitability. A buyer will normalize it back to market, but only if someone points it out. Handled properly, splitting the practice and the real estate into two clean transactions frequently produces a better combined result than selling them as one bundle.
3. The Nine Factors That Move Your Number
These are the items Karl examines first, in roughly the order they matter on an Arizona transaction.
| # | Factor | Why buyers care | Direction of impact |
|---|---|---|---|
| 1 | Adjusted EBITDA | It is the number the lender underwrites. Everything else is commentary. | Highest single driver of price |
| 2 | Hygiene production as a share of total | Hygiene revenue continues after the owner leaves. It is the most transferable revenue in the practice. | Strong positive above roughly a quarter of production |
| 3 | Owner clinical dependence | If the owner personally produces most of the dentistry, the buyer is buying a job, not a business. | Strong negative when concentration is high |
| 4 | Active patient count and new patient flow | Demonstrates the practice replenishes itself rather than coasting on a legacy base. | Positive; declining new patients is a red flag |
| 5 | Lease terms and remaining years | An SBA lender generally wants lease term at least matching the loan term, including options. | Can block a deal entirely |
| 6 | Payer mix | Fee-for-service and strong PPO reimbursements support margin. Heavy discount plan exposure compresses it. | Moderate, and it shapes which buyers bid |
| 7 | Equipment age and technology | Digital records, digital radiography, and a scanner reduce the buyer’s immediate capital outlay. | Moderate; deferred capital reads as a hidden discount |
| 8 | Staff tenure and willingness to stay | A team that stays keeps the schedule full through the transition. Turnover at closing destroys value fast. | Moderate, and often underrated |
| 9 | Books that survive diligence | Every unexplained discrepancy costs credibility, and lost credibility gets re-priced. | Protects the price you negotiated |
Notice that only one of the nine is a revenue figure. Sellers tend to focus on collections because it is the number they track weekly. Buyers and lenders focus on what is left after expenses and whether it will still be there next year without you.
4. Worked Example: Three Practices, Identical Collections
The clearest way to show why collections alone is a poor guide is to hold it constant. All three of the practices below collect $1,200,000 a year. They are composites built to illustrate the mechanics, not specific client practices.
| Practice A — Chandler | Practice B — Central Phoenix | Practice C — Scottsdale | |
|---|---|---|---|
| Annual collections | $1,200,000 | $1,200,000 | $1,200,000 |
| Overhead | 62% | 76% | 58% |
| Adjusted EBITDA | $456,000 | $288,000 | $504,000 |
| Hygiene share of production | 28% | 17% | 31% |
| Owner clinical days per week | 4 | 5 | 3, with a full-time associate |
| Payer mix | Mostly PPO | PPO with heavy discount plan exposure | Largely fee-for-service |
| Lease | 6 years remaining plus option | 18 months remaining, no option | 8 years remaining, owner owns the building |
| Equipment | Digital, scanner added 2 years ago | Analog radiography, chairs 15+ years old | Fully digital, CBCT on site |
| Likely outcome | Sells near the middle of the range, clean SBA-financed deal, multiple offers likely | Difficult to finance as-is. The lease alone can stop the deal. Expect a discount or a fixed-then-list plan. | Premium positioning, attracts both individual buyers and DSO interest, real estate handled as a separate transaction |
Same top line, roughly a two-to-one spread in enterprise value
Practice B is not a bad practice. It is a practice with three fixable problems and one urgent one. The 18-month lease is the urgent one, because no SBA lender will write a ten-year note against a lease that expires in a year and a half. Renewing that lease before listing costs the owner nothing but a conversation with the landlord, and it can be the difference between a financeable deal and no deal.
The overhead gap between B and C is $216,000 a year in earnings. At a mid-single-digit multiple, that difference alone is worth more than a million dollars of enterprise value. This is why Karl’s first conversation with a seller who is 18 to 24 months out is usually about overhead and the lease, not about listing.
5. Adjusted EBITDA, and Why Your Tax Return Understates Your Practice
Your tax return is optimized to minimize taxable income. Your valuation needs the opposite: an honest picture of what the business earns for an ordinary owner. Bridging the two is called normalizing, and the adjustments are called add-backs.
| Add-back | What it is | Scrutiny level |
|---|---|---|
| Owner compensation above market | The portion of your salary above what a replacement associate would be paid to do your clinical work. | Expected and routine |
| Personal vehicle | Lease, fuel, and insurance for a vehicle run through the practice. | Routine, if documented |
| Family payroll | Wages to a spouse or child who does not perform a replaceable role. | Routine, if the role is genuinely non-essential |
| One-time legal or consulting fees | Non-recurring professional costs from a specific event. | Accepted with an invoice trail |
| Owner travel and CE | Continuing education and travel beyond what a normal owner incurs. | Partial. A buyer will still need some CE budget. |
| Above-market rent to yourself | Rent paid to an entity you own, above local market rate. | Accepted, but a market rent study is often requested |
| Deferred equipment maintenance | Not an add-back. This is a deduction the buyer will make. | Works against you |
The discipline that matters here is restraint. A seller who presents twelve aggressive add-backs invites a buyer to challenge all twelve, including the six that were legitimate. A seller who presents five well-documented add-backs generally keeps all five. Karl’s banking background is most useful precisely here, in knowing which adjustments a lender’s credit committee will accept without argument.
6. What Quietly Lowers Your Value
Most value erosion is not dramatic. It accumulates through decisions that were reasonable at the time and were never revisited.
A short lease
The most common deal-killer Karl sees in Arizona. Financing terms are constrained by the lease term. Fix this first, and fix it before you tell the landlord you are selling.
Declining new patients
A three-year downward trend in new patients reads as a practice in decline regardless of what collections did, because collections lag.
One-doctor dependence
If you personally produce nearly all the dentistry and the patients came for you, a buyer is pricing in attrition risk. Building hygiene and associate production reduces it.
Deferred equipment
Analog radiography and aging operatories are subtracted at replacement cost, not at book value.
Messy books
Commingled personal expenses, inconsistent reporting, or a production report that does not reconcile to the tax return. Each discrepancy costs negotiating leverage.
Waiting too long
Practices sold under health or burnout pressure sell for less because production has usually already softened and there is no time to fix anything.
The sixth is the expensive one. A dentist who plans a transition three years out can address overhead, lease, hygiene, and equipment deliberately. A dentist who needs to be out in ninety days sells whatever the practice looks like on that day.
7. When to Get Valued
A valuation is not only a selling document. It is a planning instrument, and it is most useful well before you intend to act.
| Where you are | What a valuation gives you | What to do with it |
|---|---|---|
| 5+ years from exit | A baseline and a list of the highest-leverage improvements. | Work the overhead and hygiene numbers. Revisit every couple of years. |
| 2 to 3 years out | The most valuable timing. Enough runway to fix the lease, upgrade equipment, and build associate coverage. | Build a written transition plan with target metrics. |
| 12 months out | A realistic asking price and a clear diligence readiness checklist. | Clean up the books. Renew the lease. Assemble the document package. |
| You received a DSO offer | An independent benchmark against the offer on your desk. | Never evaluate an unsolicited offer without knowing your independent value first. |
| Partnership, divorce, or estate need | A defensible number for a legal or tax process. | Ask specifically for a formal written valuation, not a broker opinion of value. |
8. How Karl Values an Arizona Practice
The valuation conversation is confidential. Here is what actually happens.
The first conversation
Fifteen to thirty minutes by phone. Your timeline, your goals, and whether selling is even the right move right now. Sometimes the honest advice is to wait two years.
Financial review
Three years of tax returns, production and collections reports, an aging report, the fee schedule, and the lease. Karl normalizes the earnings and builds the add-back schedule.
Market comparison
Positioning against comparable Arizona transactions, adjusted for submarket. A practice in North Scottsdale and one in Yuma are not priced against the same set of comparables.
The written opinion
A value range with the reasoning shown, the factors helping and hurting you, and a specific list of what would move the number if you have time to act on it.
Karl handles every valuation personally. There is no analyst team, no junior associate, and no handoff. That is a deliberate constraint on how many clients Frye Practice Sales takes at once, and it is the reason clients get direct access to the person who actually knows their file.
9. Frequently Asked Questions
How much does a dental practice valuation cost?
Karl provides a confidential opinion of value. A formal written valuation for legal, partnership, or estate purposes is a separate engagement, because it requires a different standard of documentation and is meant to be defensible to a third party.
How long does a valuation take?
Once Karl has your financial documents, a working range typically comes back within a few business days. The longer part is usually assembling the documents, not the analysis.
Will my staff or patients find out I am exploring a sale?
No. The valuation conversation is entirely confidential. Nothing is marketed, no listing appears anywhere, and no buyer is contacted unless and until you decide to move forward. When you do list, marketing goes only to pre-qualified buyers under a signed non-disclosure agreement.
What documents do I need to provide?
Three years of practice tax returns, production and collections reports by provider, an accounts receivable aging report, your current fee schedule, your lease, and an equipment list. If some of these are hard to pull, Karl can work from a smaller set for an initial range.
Is a percentage of collections a reliable rule of thumb?
It is a reasonable first estimate for a typical solo general practice with ordinary overhead. It becomes unreliable when overhead is unusually high or low, when the owner produces nearly all the dentistry, or when the practice is large enough to attract DSO buyers who price on earnings rather than revenue.
Does owning my building change the valuation?
Yes, in two ways. The practice and the real estate are valued separately, and any rent you pay yourself gets normalized to market rate when calculating practice earnings. If you have been charging yourself above-market rent, your practice looks less profitable than it is until that adjustment is made.
Should I get a valuation before responding to a DSO offer?
Yes. An independent value is what allows you to read the offer’s structure rather than only its headline number. Cash at close, equity rollover, post-sale employment terms, and compensation in later years all vary widely between offers that quote a similar total.
Do you value specialty practices?
Yes. Orthodontic, oral surgery, periodontic, endodontic, and pediatric practices are valued primarily on earnings rather than collections, with particular attention to referral source concentration, which is the main risk factor a buyer will price.
Find Out What Your Practice Is Actually Worth
A confidential conversation with Karl. Whether you are selling next quarter or in five years, knowing your number is the starting point for every other decision.