Medical Practice Business Valuation Benchmarks

Business owners and prospective buyers rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business-for-sale market and important benchmarks for pricing and evaluating medical practices relative to industry standards.

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Highlights of Medical Practices Sold on BizBuySell

Medical practices listed and sold on BizBuySell range from small single practitioner family and primary care practices to highly specialized practices. Common specialties include optometry, pediatrics, endocrinology, cardiology, chiropractors and physical therapists, OB-GYN practices, surgical centers, and dermatology practices.

Medical Practice Business Transaction Trends

The median sale price of medical practices listed and sold on BizBuySell has increased every year for the past five years - accelerating in 2023 and 2024. Between 2020 and 2024, the median sale price of medical practices sold has grown 63% - around twice the rate of the overall business-for-sale market.

Medical Practice Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of revenue and earnings. They represent the sales price of a business relative to its financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic growth.

Average revenue and earnings multiples of medical practices sold on BizBuySell are somewhat volatile, trending above and below 0.75 and 2.25, respectively.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most business valuations hinge on the earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its overall sales.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of medical practice businesses for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are generally higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high volume, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Lower volume businesses with thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of medical practices are valued between 1.37 and 2.71 times their annual seller discretionary earnings, with 25% of well-run, larger practices trading above this range, and 25% of smaller, less popular practices trading below.

Financial Benchmarks

To determine how a business compares in terms of revenue and earnings relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated financial ranges useful for comparing an individual medical practice business to its peers in the market.

Medical Practice Revenue and Earnings Trends

Reported revenue of medical practices sold on BizBuySell has been increasing annually, growing 67% from 2020 through 2024. Seller's discretionary earnings has also been improving, with more volatility, and increased 34% over the same time period.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to other businesses traded on the market. Below you will find discretionary earnings ranges for medical practices sold over the past five years, as well as recent for sale listings.

Revenue Ranges

Sales volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue. The table below includes revenue ranges of medical practices sold over the past five years, as well as recent for sale listings.

How Revenue and Earnings Level Affects Business Values

Clearly higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Successful medical practices that consistently generate higher revenue (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a medical practice consistently generating sales over $1.25MM annually may sell for an earnings multiple around 2.7 or higher, while a smaller practice with sales below $400k may sell for an earnings multiple closer to 1.4 or less.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Higher volume businesses give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader healthcare and fitness sector when benchmarking medical practice businesses. The chart and table below include key metrics from sales of select healthcare and fitness businesses on BizBuySell between 2020 and 2024.

Medical practices tend to receive a discounted valuation relative to their revenue and earnings. The pool of potential buyers is much smaller, because generally a practice is sold by the practitioners, and so only a qualified replacement can purchase it. Given the small pool of potential suitors, these transactions close at smaller valuations.

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