Worked example
A practice reporting $600,000 of owner earnings, tested at placeholder 3x and 5x multiples
A solo practice reports $600,000 of owner earnings before the owner is paid as a dentist. The owner documents $50,000 of one-time costs, and replacing the owner's clinical work would cost $250,000 a year. The deal assumes $200,000 of practice debt and $50,000 of excess cash. The 3x and 5x multiples are placeholders to show the arithmetic, not a market range for dental practices.
Inputs
| Reported practice earnings | $600,000 |
|---|---|
| Supported add-backs | $50,000 |
| Replacement-dentist compensation | $250,000 |
| Low and high multiples | 3x and 5x |
| Debt in the equity bridge | $200,000 |
| Excess cash in the equity bridge | $50,000 |
Calculator output
| Normalized earnings | $400,000 |
|---|---|
| Enterprise value | $1,200,000 to $2,000,000 |
| Equity value after debt and excess cash | $1,050,000 to $1,850,000 |
$600,000 plus $50,000 minus $250,000 leaves $400,000 of normalized earnings. At 3x and 5x that is $1,200,000 to $2,000,000 of enterprise value; subtracting $200,000 of debt and adding $50,000 of cash gives the equity range. This is arithmetic on your inputs. It is not a certified valuation, appraisal, or offer price.