We’re getting to that point where we’ve passed the acceptable date to wish one another Happy New Year, so I’ll refrain and leave it to be implied.
I hope the start of 2026 has been a good one for you, your family, and your practice.
Since numbers and spreadsheets seem to access a dopaminergic centre in my brain, I thought I’d share a snapshot of data with you. Don’t make any major life decisions on this but use it for what it’s worth.
As a company, we compiled 34 recent dental practice listings we’ve had access to from both our own work with clients and that of other appraisers. We ran a quick analysis of some high-level metrics for practices in the regions of Quebec, Ontario, Alberta, and BC. We excluded uniquely remote listings and stuck with more urban centres. We excluded the nicest people in the country – our friends in the Maritimes – not because we don’t love them dearly, but because the dental practice marketplace is indeed a very different one once we reach the part of the country where lobster dips below ten dollars a pound.
In our snapshot review, we looked at gross revenue, cash flow (before doctor’s earnings), and appraised value to get a sense of where the market has landed since interest rates have become more stable in Canada (crossing my fingers while I type so I don’t jinx it, Mr. Macklem…).
The average gross revenue of the 34 practices we looked at was $1,286,535. Revenue in our cohort ranged from ~$600,000 to ~$3.5M). The average earnings of the sample size we looked at was $626,000, which represented 47% of gross revenue. Now before you scoff at me through your phone for suggesting practice earnings are 47% of billings, remember that the 47% of revenue represents normalized cash flow. This removes taxes, depreciation, amortization, owner’s compensation, the house kitchen renovation the seller put through through their practice expenses last year, thousands of dollars spent at Costco and Amazon on personal items that were put through the practice, and anything else that was deemed “discretionary” by the appraiser. This number is not out of line with what we’ve seen historically. Quite often, normalized expenses are in the neighbourhood of 55% of gross, which means 45% of revenue gets represented as cash flow.
Looking at the multiple that represented the practice value relative to the cash earnings, the average we noted was exactly 3.0. That means that if a practice grossed $1,286,535 and earned $626,000 in normalized earnings, the average value was 3 x $626K = $1,878,000. Keep in mind this was not adjusted based on location or any of the multitude of variables that influence value. It’s just an average.
As a multiple applied against gross revenue, our sample size revealed value was exactly 1.5x gross revenue right now. So, if we took our example practice which represents the average gross revenue from our cohort, a practice grossing $1,286,535 might be valued at 1.5X that number, around $1,920,000 Note the average value based on a multiple of gross revenue is only 2.2% higher than the earnings multiple value of 3X.
This analysis is a snapshot overview of some recent data. It isn’t a meta-analysis nor is it conclusive in any way. But, with the dental practice brokerage industry being one that severely lacks transparency (and sometimes legitimacy), we will continue to do our best at bringing knowledge and data to you however possible.
Happy New Year. I had to say it.
