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Let's discuss the key metrics that go into the valuation of a practice.
The first and the most important is EBITDA or cash flow to the business for operations.
This is the actual profit for the practice.
The next factor is the multiple divides you the third factor is the size of the practice and the size could mean here higher revenue practices or higher EBITDA practices and finally growth is also determinant of valuation in a scenario where a practice produces two hundred thousand dollars of cash flow in the buyer provides six times multiple the valuation of that practice is going to be 1.2 million dollars in a second scenario whether that same practice is given a 10x multiple by the buyer that practice valuation is now significantly higher at two million dollars the size of the EBITDA or the practice will play a role in increasing your multiple the growth of a practice also will play a role in increasing your multiple for example if a practice is growing 20% a year that practice is going to be worth double that amount in five years time and finally a very key figure that draws practice valuation is group power that we'll be discussing in subsequent videos group power can significantly increase the multiple for practice valuations