Dermatology Practice Valuation
29 valuation methods · 43 industries · Results in under 10 minutes
In short
A dermatology practice is valued on normalized EBITDA times a multiple chosen from its payer mix: the more medical revenue from commercial insurers, the higher the band. Cash-pay cosmetic work, ancillary services and providers who stay after a sale shape what buyers pay.
Who this is for
Owners of medical, surgical and cosmetic dermatology practices and groups preparing to sell, bring in partners or join a larger group, and buyers who need insurance-billed care, cash-pay cosmetic work and ancillary services read apart.
How is a dermatology practice valued?
VA values a dermatology practice on normalized EBITDA: earnings after the add-backs you confirm, including resetting an owner-physician's pay to what it would cost to hire a dermatologist for that work. The multiple is chosen from the payer mix, because commercial insurers pay more than government plans for the same care, and a group of clinics is priced at the level a group commands, above the band for a single clinic. Established clinics, recently acquired clinics and new clinics still ramping up are each valued on their own terms. A discounted cash flow checks the result, and comparable companies and precedent transactions sit alongside it. This tool is informational only. Output is driven by your inputs and does not constitute a formal appraisal or certified valuation.
What drives the value of a dermatology practice?
- The share of medical revenue from commercial insurers against Medicare and other government plans
- Cash-pay cosmetic and aesthetic revenue, and how steady it is through a slow economy
- Mohs surgery, pathology and other ancillary services performed in-house
- Physicians and advanced practice providers, their ages, and whether they will stay after a sale
- The number of clinics, and whether they share one brand, one scheduling system and one payer contract
- How much of the patient demand follows the founding physician
What lowers the value of a dermatology practice?
- Demand that follows the founding physician
- Cosmetic revenue that falls with consumer spending
- Ancillary billing that has not been audited
- Providers near retirement or free to leave after a sale
How much is a dermatology practice worth? A worked example
Commercial payers and the multiple
A group of five dermatology clinics has $3 M of normalized EBITDA. With 70% of revenue from commercial insurers, VA's clinic model applies about 10× at the middle of its range: about $30 M before debt and before its discounted cash flow check. With 50% from commercial insurers, the multiple is 9.1× and the value about $27.4 M.
Illustrative figures from the industry model alone. A full report blends it with a discounted cash flow, comparable companies and precedent transactions.
Value your dermatology practice in under 10 minutes
- 1.Upload your financial statements, or type the figures in.
- 2.Confirm the add-backs and the industry details the model asks for.
- 3.Get a valuation range, the methods behind it and a PDF memorandum.
Which numbers matter most?
Normalized EBITDA
EBITDA after the add-backs you confirm, such as resetting an owner-clinician's pay to what the clinical work would cost to hire. The payer-mix multiple applies to it.
Payer mix
The share of revenue from commercial insurers rather than government plans. It chooses the band of multiples VA's healthcare model applies: the higher the commercial share, the higher the band.
Same-clinic growth
Growth at clinics open more than a year. Above a mature pace, VA treats part of the earnings as clinics still being brought up to the group's standard and values them as their own layer.
Cash-pay share
Cosmetic and aesthetic revenue paid by patients directly. It sits outside the payer mix, so buyers read it separately: higher margins, but it follows consumer spending.
Provider count
Physicians and advanced practice providers seeing patients. Buyers read revenue per provider to judge capacity and how the group would run without its founder.
What do you need to value a dermatology practice?
- Profit and loss statements and balance sheets, ideally for the last three years
- Figures for the current year to date
- A list of add-backs: the owner's pay and perks, and any one-off costs
- Loan and lease balances
- Revenue split between insurance-billed care, cash-pay cosmetic work and ancillary services
- Revenue by payer, with the rates negotiated with commercial plans
- A list of providers with their employment terms and restrictive covenants
Example scenarios
A group that bills more commercial plans
Two dermatology groups earn the same, but one draws more of its medical revenue from commercial insurers. VA's healthcare model applies a higher band of multiples to it, and the worked example shows how far that moves the value.
A founder who is also the cosmetic brand
Patients come for the founding physician's cosmetic work. The earnings are real, but a buyer asks how much of that demand stays after the founder steps back, and may tie part of the price to it.
Further reading
How to Value a Dental Practice: Collections, EBITDA, and What DSOs Actually Pay
Dental practice valuation explained: the percentage-of-collections rule, when EBITDA multiples take over, what drives DSO offers, and a worked example for a $900K practice.
How to Value an HVAC Business in 2026: SDE and EBITDA Multiples
HVAC businesses sell for about 2x to 3.3x SDE for small shops and 5x to 9x EBITDA for larger firms. See 2026 multiples by size and what drives the number.
Add-Backs Explained: Which Adjustments Survive Diligence
Add-backs adjust reported earnings to reflect true business profitability. Learn which add-backs buyers accept, which they reject, and how normalization affects the valuation.
Frequently asked questions
How is a dermatology practice valued?
On normalized EBITDA times a multiple chosen from the payer mix. VA's clinic model prices groups at the level a group commands, values recently acquired and new clinics as their own layers, and checks the result with a discounted cash flow.
Why does payer mix change the value?
Commercial insurers usually pay more for the same visit than Medicare or Medicaid, and government rates can be cut by regulation. VA's healthcare model moves to a higher band of multiples as the commercial share rises.
Is a single practice valued like a group?
VA's clinic model is built for groups of clinics: it prices earnings at the level a group commands, above the band for a single practice. For one practice, compare the result with the precedent transactions in the report, which show what similar practices have sold for.
How is cash-pay cosmetic revenue treated?
It counts in the earnings the model values. It is not billed to insurers, so enter the payer mix for your insurance-billed revenue and tell a buyer what share of revenue is cash-pay; they will read it separately.
Do in-house pathology and Mohs surgery raise the value?
They raise the earnings, which the model values. Buyers also check that they are billed correctly, because ancillary services draw payer audits.
Is this a certified appraisal?
No. This is an informational estimate. A bank loan, a partner buyout or an estate matter may require a certified business appraisal, which this does not replace.
Terms used on this page
- Normalized EBITDA
- EBITDA after add-backs, so it shows what the business earns in a normal year under a new owner.
- Add-backs
- Costs added back to reported earnings because a new owner would not bear them: personal expenses run through the business, one-off costs, or owner pay above what the role would cost to fill.
- Payer mix
- The split of a practice's revenue between commercial insurers, government plans such as Medicare and Medicaid, and patients who pay directly.
- Valuation multiple
- The number earnings are multiplied by to reach a value. It rises with how durable the earnings are and how easily a new owner can keep them.
- Enterprise value
- The value of the business itself, before debt is subtracted and cash added. The owner's proceeds come from what is left.
- Precedent transactions
- A method that values a business at the multiples paid in past sales of similar companies.
As featured in
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Last reviewed September 26, 2026 against VA's valuation models.