EBITDA isn't a foreign term or a character from Star Trek—it's a critical accounting term. Why? Because it determines your profit, which is essential when assessing your practice's value for a future sale. You will hear your Coach talk about it when reviewing your finances, because even if you’re not ready to sell, your Coach is supporting you in planning for the future, and EBIDTA will allow us to see how much your practice could be worth*.

So, what is EBITDA?

It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization—an important number that gauges your financial health, no accounting degree needed.

Calculation: Gross Revenue – Expenses** / Gross Revenue x 100

Ideally, a well-run practice should maintain an EBITDA of 20%. Yet, most vet practices operate around half that, signaling a break-even scenario or a yearly loss after all expenses.

Here's the catch: high gross revenue doesn't guarantee attractiveness to a buyer if you spend everything you earn. Consider this example: Practice A nets $20,000 annually, while Practice B nets $400,000. At first glance, Practice B seems more profitable. But when you factor in Practice A's $100,000 gross versus Practice B's $2 million, they're equally profitable, both operating at 20% EBITDA.

If your EBITDA is not where you want it to be, there are two important things to do: Decrease expenses and boost revenue. We get it, that can be easier said than done! Benchmarking against industry standards for expenses and income per profit center is a great start. Analyze and focus your efforts on cost-cutting or revenue-boosting strategies. This is where your Practice Coach can help with a Financial Analysis. Your Coach will go line by line with you through your Profit and Loss Statement to identify opportunities to save money and reach your financial goals.

With your Coach, you’ll set goals, monitor bi-monthly or monthly, and adapt as needed. This keeps you informed and optimizes your practice's financial standing, paving the way for a stronger position when it's time to sell.

*Many factors play into the true value of a practice, and your EBITDA is just one component.
**Expenses include costs of goods sold (COGS), payroll, taxes, benefits, maintenance, admin costs, marketing, and fee-related expenses.