GI Practice Valuation - A 2,500 word guide on influencing EBITDA
Whatever EBITDA is, it’s a hot term with medical practices these days. Because it’s a measure that investors value. Before exploring strategies to grow EBITDA, let’s first understand the elements of a basic financial statement and where EBITDA fits in.
• Revenues: Money that you make from insurance reimbursements, patient payments and so on
• Operational Costs: Money required to run operations
• Operational margin (or profits): Revenues minus operational costs
• Sales and General administration: Money that you spend on sales/promotions and to manage the overall company
• EBITDA (Earnings before interest, taxes, depreciation and amortization): Profits of your business after taking out most expenses but without considering taxes and certain accounting factors.
If it helps simply think of EBITDA as a measure of profitability or operational