Let's discuss group power and how it can improve your valuations. So, we've already indicated that EBITDA or cash flow plus multiples are the two key metrics that determined practice value or valuation. As an example, a practice producing $200,000 in EBITDA that gets a 6x multiple from the buyer is worth 1.2 million dollars. A bigger practice $800,000 of EBITDA will get a higher multiple 8X leading to a valuation of 6.2 million dollars, now let's add several practices together. A practice that produces 200,000 of EBITDA, 800,000 of EBITDA, 300,000 of EBITDA and 100,000 of EBITDA and 600,000 EBITDA. A total EBITDA value of 2 million dollars will get a higher multiple here. In this case, 10x. So, these practices now will be worth 1 million, 8 million, 3 million, 1 million, and 6 million. Jobbing the valuation up considerably. Finally, in addition to valuations, grouping practices together will increase the terms of the sale
Group power, where your hospital is sold as one of several veterinary hospitals, is a significant factor in raising hospital valuations. Platform buyers, as defined as corporations who are buying veterinary hospitals, are much more likely to pay more, by offering a higher multiple, if they are able to buy several hospitals rather than one hospital.
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