This blog explains the key steps to valuing your private practice and why understanding EBITDA is essential for succession and financial security.
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Episode 17 | Watch on YouTube
According to the Exit Planning Institute, only 2% of business owners know the true value of their business, yet 98% agree that valuation is essential for succession planning and financial security. Brandon Seigel wants to close that gap — and he wants you to start now, not the year before you sell.
Start with revenue minus all expenses. Look at the net percentage. Assess whether your salary is market-rate for the functions you actually perform. Underpaying yourself artificially inflates net profit and distorts your valuation — because no buyer will take over your role for $45,000 a year.
Once you have your net profit, begin your add-back process. This includes: owner salary adjustments (the difference between what you pay yourself and what it would cost to replace your function at market rate), owner perks and benefits, discretionary expenses approved by your CPA, and non-recurring expenses such as one-time equipment purchases or legal fees. Tools like Econologics help practice owners model this properly with the support of financial professionals.
The sum of your net profit plus all legitimate add-backs becomes your adjusted EBITDA — earnings before interest, taxes, depreciation, and amortization. This is the number buyers actually use. A practice showing $500,000 in net profit may reveal a $700,000 EBITDA once perks, benefits, discretionary spending, and salary adjustments are added back properly.
Valuation is not about what you think your business is worth. As Warren Buffett has said, it is about what someone else is willing to pay for it. The key is getting both buyer and seller to agree on the EBITDA figure first, then negotiating the multiplier. Get at least three independent valuations. Use the conservative figure as your foundation, then build a strategy to increase it. That process alone will show you exactly what operational changes will move the needle on your practice's value.
