Most groups sell on an EBITDA lower than the group can actually produce

Most dental group transactions close on an EBITDA that's lower than the group is actually capable of producing, and nobody involved in the deal ever finds out.

The financial QoE may be clean, with normalized add-backs, verified revenue, and a listing built around a number that's technically financially accurate. But underneath that number, across the locations, there's almost always operational revenue that should be flowing through and isn't. No-show rates running double at certain offices compared to others in the same group, treatment plans that patients accepted a year ago and nobody followed up to schedule, recall systems that quietly stopped functioning after staff turned over and were never rebuilt. That variance adds up to $200K to $500K or more in annual revenue that the group should be producing, and because nobody in the transaction is scoped to evaluate operational performance at the location level, it just sits there suppressing the EBITDA that the entire deal gets priced on.

At 5x to 8x multiples, that's $1M to $3M or more that should have been in the deal and wasn't. The seller goes to market on a number that understates what they built, and the deal closes smaller than the group warranted. Not to mention the broker's commission gets calculated against that smaller number. Nobody did anything wrong. There is simply an entire layer of revenue sitting inside the operations that falls between every discipline involved in the transaction and never gets surfaced.

The part that makes this worth paying attention to is that the revenue isn't theoretical. These are patients already in the system, who already said yes to treatment or were already coming in regularly before someone dropped the process. So recovering it before listing doesn't require projections or assumptions. It requires someone going into the PMS across every location, diagnosing why the variance exists site by site, and building the systems to capture what's there. The EBITDA then goes up on real recovered earnings, the multiple gets applied to a bigger base, and the deal closes at a number that actually reflects the full capability of the group.