EBITDA and Valuation: How Cash Flow Defines the Real Value of Medical and Dental Clinics
- Admin
- Aug 28
- 2 min read
EBITDA and Valuation: How Cash Flow Defines the Real Value of Medical and Dental Clinics
1. What is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. In practice, it represents a company’s operational cash flow, excluding financial effects (interest), tax obligations, and accounting adjustments such as depreciation and amortization.
For medical and dental clinics, EBITDA is one of the most important indicators used in market value assessments (valuation) because it demonstrates the real capacity for generating recurring results.
2. Simplified Calculation Structure
The EBITDA calculation follows this logic:
Gross Revenue– Variable Costs = Contribution Margin– Fixed Operating Costs = EBITDA
3. Practical Example
Imagine a clinic with the following data:
Monthly Revenue: US$ 300,000
Variable Costs: US$ 150,000
Fixed Costs: US$ 100,000
Calculation:
Gross Revenue: US$ 300,000
– Variable Costs: US$ 150,000 = Contribution Margin: US$ 150,000
– Fixed Costs: US$ 100,000 = EBITDA: US$ 50,000/month
Annualized EBITDA: US$ 50,000 × 12 = US$ 600,000
4. Valuation by Multiples
In the market, medical and dental clinics are typically valued based on multiples of their annual EBITDA. The multiple varies depending on risk, location, size, and structure of the clinic.
Example ranges:
2x EBITDA: US$ 1,200,000
3x EBITDA: US$ 1,800,000
4x EBITDA: US$ 2,400,000
5x EBITDA: US$ 3,000,000
5. Conclusion
To correctly calculate the value of a clinic, it is essential to start with annualized EBITDA, which reflects the real capacity for generating cash. It is on this number that market multiples (2x, 3x, 4x, etc.) are applied, defining a fair valuation for purchase, sale, or merger operations.
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Senior Consulting in Management and Marketing
Reference in healthcare business management
