Dental practices are typically valued using five methods: capitalized earnings, average annual earnings, net asset value, discounted cash flows and annual net receipts. Each measures something different, and a professional valuation normally applies several of them together rather than relying on one.
Most of a dental practice’s value sits in goodwill (patient relationships, reputation and a stable team) rather than in equipment or real estate. That is why earnings-based methods usually give a more realistic figure than asset-based ones. Henry Schein Dental Practice Transitions, which has guided dental practice transitions since 1993, weighs each method against a practice’s collections, overhead, patient base, staffing and local market so owners know their value before making transition decisions.
Last updated: October 2026
Whether you’re looking to buy a new dental practice or you want to sell the one you currently own, determining the practice’s value is an integral step of any transition. Many different methods and valuation formulas are used to determine a dental practice’s worth. Such formulas generally consider three main factors: risk of investment, return on investment, and cash flow. For the best results, a professional dental practice transition consultant should implement a combination of a variety of valuation methods. To better understand how the value of a practice is determined, consult this guide to dental practice valuation methods.
The importance of determining your practice’s value
In a dental practice transition, determining the value of the practice is essential for the selling and purchasing parties. This will help shape negotiations regarding the transition and ensure that both parties get a fair deal. Unfortunately, many dentists don’t have an accurate estimate of the value of their practices, which can result in lost funds for both parties.
Importance for the buyer
- When someone embarks on the journey of purchasing a dental practice, an accurate valuation of the practice will help them determine if the acquisition is an affordable and beneficial investment.
Importance for the owner
- For the doctor who’s selling their practice, understanding its value will help them with financial planning and ensure they aren’t leaving any money on the table. Even if a dental practice owner isn’t planning on selling in the near future, having their practice appraised periodically can still be beneficial. By knowing the value of their practice, they can better understand its net worth, plan for retirement, and develop an effective emergency exit strategy.
Dental practice valuation methods
Capitalized earnings method
The capitalized earnings method is a commonly-used method that’s based on the income of the practice. To determine the value of a dental practice using this method, you’ll need to average the practice’s net income from the previous year or the past few years. The net income takes into account factors such as operating expenses, collections, and professional compensation; these expenses are deducted from the average annual net receipts. After the net income has been calculated, the residual average excess earnings are divided by a risk factor known as the cap rate. In the dental industry, cap rates range from about 15 to 50 percent, and most practices fall between 20 and 30 percent. After you make these calculations, you’ll have an accurate estimate of the practice’s investment value.
Average annual earnings method
The average annual earnings method is very similar to the capitalized earnings method; however, it doesn’t factor doctor compensation into the percentage of doctor production. To calculate the average annual earnings of a dental practice, consider the practice’s net earnings that are available to the owners. Typically, the annual net earnings will be based on the past three years. This number is then multiplied by a percentage based on recent sales and purchases of other dental practices in the area. Most practices are valued at about 1.0 to 2.2 times adjusted seller’s discretionary earnings (SDE), or about 3 to 6 times earnings before interest, taxes, depreciation and amortization (EBITDA). The two measures are calculated differently, so their multiples are not interchangeable.
Net asset value method
Another way to determine the value of a dental practice is to base calculations on the appraised value of the practice’s tangible and intangible assets. Tangible assets—which may include real estate and dental and office equipment—are typically expressed at a percentage of their original cost to account for depreciation.
The majority of the value of most dental practices, however, lies in intangible assets such as practice goodwill. Goodwill typically accounts for about 65 to 80 percent of a practice’s sale price. This percentage depends greatly on the location of the practice, patient demographics, supply, demand, and other factors. Because goodwill is often difficult to appraise, the net asset value method isn’t always the most reliable for all dental practices. However, if your practice has significant real estate holdings or is experiencing financial issues, this method may be advantageous. The net asset value method should be used in conjunction with other valuation methods to assure greater accuracy.
Discounted cash flows method
With the discounted cash flows method, the valuation of the dental practice is based on the net present value of the projected net income for the next 10 years. The projected incomes are determined based on a reasonable growth rate of collections and yearly practice costs. After the incomes are calculated, they’re discounted by an estimated cost of capital in addition to a risk premium. Like other income-based methods of valuation, the discounted cash flows method is ideal for practices with a proven history of substantial revenue and growth as well as a sizable patient base.
Annual net receipts method
Also known as a market-based valuation method, the annual net receipts method is helpful for quickly analyzing collection trends. To determine the annual net receipts, you must calculate a percentage of the average annual net receipts over the past three years. To do so, you’ll use information based on the market data for other dental practices that have been sold in the area in the past few years. Most practices in most locations sell for about 60 to 85 percent of annual collections, and the full range runs from 50 to 100 percent depending on the makeup of the practice. The reason for this wide variation is largely because this method focuses solely on collections and considers neither profit nor the time and expenses required to produce the collection. Furthermore, finding comparable practice sales figures can be difficult. As such, the annual net receipts method isn’t always the most accurate method of valuation when used alone.
Ranges reflect Henry Schein Dental Practice Transitions valuation experience and were last reviewed in October 2026.
If you’re interested in selling your practice, Henry Schein Dental Practice Transitions can help. As a dental and oral surgery practice transition planner, we understand that knowing the value of your practice is the first step to a successful transition. As such, our effective seven-step approach begins with a formal, comprehensive dental practice valuation. To ensure that you have the smoothest and most beneficial dental practice transition possible, contact us today.
Frequently Asked Questions
How is a dental practice valued?
A dental practice is valued using a combination of methods: capitalized earnings, average annual earnings, net asset value, discounted cash flows and annual net receipts. Each measures a different aspect of the practice, and a professional valuation weighs them together rather than relying on any single formula.
What is my dental practice worth?
Practice value depends on collections, profitability, overhead, patient base, staffing, equipment, facility, payor mix and local market demand. Most practices in most locations sell for about 60 to 85 percent of annual collections, though the range moves with location and practice performance. A professional valuation is what establishes the figure for a specific practice.
Why is goodwill such a large share of a dental practice’s value?
Goodwill covers patient relationships, reputation, referral patterns, staff continuity and the systems that keep a practice running. In most dental practices, goodwill accounts for about 65 to 80 percent of the sale price, which is why a valuation based only on equipment and real estate will usually understate what a practice is worth.
What is the difference between a valuation and an online valuation calculator?
An online calculator applies one formula, usually a percentage of collections, to a single number. A professional valuation reviews financial statements, production and collections, overhead, patient activity, staffing, equipment condition, lease terms and comparable local sales, and applies several methods before arriving at a figure. The two can produce very different numbers for the same practice.
How often should a dental practice be valued?
Reviewing practice value every year, and at minimum every two to three years, gives an owner time to act on anything that would affect the figure. Owners planning a sale generally start 12 to 24 months ahead, which leaves room to address overhead, hygiene performance, staffing or equipment before the practice goes to market.
Does higher revenue mean a higher practice value?
Not on its own. Valuation is driven by sustainable earnings rather than top-line collections. A practice with lower revenue and controlled overhead can value higher than a busier practice carrying heavy costs, high staff turnover or a shrinking active patient count.
Which valuation method is most accurate for a dental practice?
No single method is reliable alone. Earnings-based methods usually reflect a dental practice better than asset-based methods because most of the value sits in goodwill. The net asset value method is more useful when a practice holds significant real estate or is under financial strain, and the annual net receipts method is a quick check on collection trends rather than a full valuation.
How much does a dental practice valuation cost?
Cost depends on the size and complexity of the practice and on what the valuation is being used for, since a valuation prepared for a sale covers different ground than one prepared for a partnership or a financing application. DPT offers a complimentary consultation to talk through what a specific practice would need.
About the Author
This guide was prepared and reviewed by the Henry Schein Dental Practice Transitions valuation team. DPT is a dental practice brokerage and valuation firm and part of Henry Schein, Inc. It has guided dental practice transitions since 1993 and provides practice valuations in all 50 states. Valuations are prepared by Transition Consultants working in their own regional markets, using practice financials alongside local market data.
