When discussions about selling a veterinary practice start, owners quickly encounter the acronym EBITDA—earnings before interest, taxes, depreciation, and amortization.
Because most corporate buyers apply a multiple to EBITDA to arrive at an enterprise value, many owners assume (for good reason) that growing that single number is all that matters. Yet two clinics with similar EBITDA can sell at very different prices. Understanding what truly drives valuation allows owners to focus on building value, not just revenue.
Valuation approaches (and where EBITDA fits in)
In the case of veterinary practices, there are three primary valuation approaches: income, market, and asset.
The income approach estimates value based on the present value of your future earnings—often using a multiple of normalized EBITDA. The market approach compares the practice to recent sales of similar clinics, adjusting for differences in size, location, and services. The asset approach looks at tangible assets minus liabilities—typically used when earnings are minimal.
Among these, the income approach is most common for healthy practices because it captures the ability to generate cash and service debt. EBITDA is a widely accepted proxy for operating cash flow.
However, EBITDA alone doesn’t reflect the entire risk profile or growth potential of a clinic. Buyers adjust multiples depending on factors that either enhance or diminish earning predictability. Recognizing these qualitative drivers—and quantifying them if at all possible—can boost the multiple that’s ultimately applied to your EBITDA.
Key drivers of value
- Practice size and number of doctors. Larger clinics with multiple doctors often command higher multiples because revenue isn’t tied to a single provider. If your clinic has only one full‑time DVM, consider recruiting an associate or structured relief to show scalability.
- Location and specialty mix. Geography matters. Urban clinics in high‑income areas may benefit from dense client bases, while rural practices sometimes struggle with recruiting associates. Specialty services—such as dentistry, orthopedics or rehabilitation—can boost valuation because they diversify revenue and differentiate the practice.
- Quality of assets and facilities. Modern medical equipment and well‑maintained facilities reduce the buyer’s future capital expenditures. An up-to-date clinic signals operational maturity and compliance. Conversely, outdated equipment or deferred maintenance can depress a valuation because the buyer may have to invest additional capital post‑acquisition.
- Market position and goodwill. A respected brand with loyal clients and strong community ties is a valuable intangible asset. Good will and reputation affects client retention and referral rates, directly impacting revenue stability.
- Team stability and leadership. Buyers look beyond the owner—they want a committed team that will stay after the sale. Low turnover, experienced associates, and effective standards reduce the reliance on the transitioning DVM.
- Growth trajectory. Historical and projected growth rates matter more than a calendar-year earnings. A clinic that consistently increases revenue and patient visits displays demand and operational discipline. Buyers may be willing to shell out premiums for a compelling growth story.
Putting it all together
To maximize valuation, owners should focus on both quantitative and qualitative factors. Grow normalized EBITDA through sound financial management, but also cultivate a resilient practice. Document all these strengths so a buyer can see not only what the clinic earns today but why those earnings will continue.
When you reflect on your long‑term goals, what are the qualitative factors that seem most important to you now? At MVG, we’re ready to collaborate with you—offering a strategic partnership every veterinarian deserves. Let’s explore this together.
