EBITDA is earnings before interest, taxes, depreciation and amortisation: what your clinic earns from running the clinic, before loans, tax and equipment accounting. Calculate it as net profit plus those four items. Buyers and investors ask for it because it lets them compare clinics fairly and price them, often as a multiple. Expect owner adjustments, and agree each one with your CA.
The first time a hospital chain's team visited a fertility centre I was working with, the very first question wasn't about pregnancy outcomes, the lab or the doctors. It was, "What's your EBITDA?"
The doctor looked at me. She knew her revenue to the rupee. She knew her profit after tax, roughly. EBITDA was just a word on a CA's slide.
If you ever plan to raise money, take on a partner or sell, this is the number you'll be asked for first. So let's make it simple.
What is EBITDA, in plain words?
EBITDA stands for earnings before interest, taxes, depreciation and amortisation.
In plain words: it's what your clinic earns from running the clinic, before four things that depend on how you funded it, how you're taxed and how your accountant spreads out the cost of equipment.
- Interest: the cost of your loans. Depends on how you chose to borrow.
- Taxes: depends on your structure and your CA's planning.
- Depreciation: the cost of equipment and fit-out, spread over its useful life.
- Amortisation: the same idea for things you can't touch, like software licences.
Take those four out and you see the engine underneath. That's why, in Rich Doctors Walk Away, I call it the number any future investor or buyer looks at first.
How do you calculate EBITDA for a clinic?
Start from net profit, the bottom line in your accounts. Then add back the four items.
EBITDA = net profit + interest + taxes + depreciation + amortisation. EBITDA margin = EBITDA ÷ revenue × 100.
Here's an example. Say an IVF centre's annual accounts look like this:
| Line | Amount |
|---|---|
| Revenue | ₹6.00 crore |
| Salaries | ₹1.30 crore |
| Lab consumables, media and medicines | ₹1.10 crore |
| Rent | ₹0.45 crore |
| Marketing | ₹0.60 crore |
| Other operating costs | ₹0.35 crore |
| Depreciation (incubators, lab equipment, fit-out) | ₹0.40 crore |
| Amortisation (software) | ₹0.05 crore |
| Interest on equipment loans | ₹0.25 crore |
| Taxes, as per the accounts | ₹0.40 crore |
| Net profit | ₹1.10 crore |
Now add back: ₹1.10 crore + ₹0.25 crore interest + ₹0.40 crore taxes + ₹0.40 crore depreciation + ₹0.05 crore amortisation = ₹2.20 crore EBITDA.
EBITDA margin = ₹2.20 crore ÷ ₹6.00 crore × 100 = about 36.7%.
Why does every buyer and investor ask for it?
Three reasons.
- It lets them compare clinics fairly. One centre has big loans, another has none. One is a company, another a proprietorship. EBITDA strips those differences out so they compare how well each clinic actually runs.
- They'll fund it their own way. A buyer will bring their own loans, their own tax position and their own equipment plan. They care about the engine, not your old financing.
- Practices are often priced as a multiple of it. In the book I use an illustration: two practices each making ₹1 crore EBITDA, one offered 3 times because it depends on its founder, the other 5 times because it runs without him. Same profit, ₹2 crore difference. The multiples are only an illustration. Your adviser will tell you what's realistic in your market.
Rule: Buyers don't pay for your past. They pay for profits that survive without you.
What owner adjustments should you discuss with your CA?
Here's where most doctors get surprised. Your accounts reflect how you ran the clinic, with your personal choices mixed in. A buyer will "normalise" EBITDA to show what the clinic earns under a normal owner. Some adjustments raise it. Some lower it.
Continuing the example:
| Adjustment | Why | Effect on EBITDA |
|---|---|---|
| The founder takes ₹12 lakh a year, but replacing her as lead specialist and medical director would cost ₹60 lakh | A buyer has to pay someone to do her job | Minus ₹48 lakh |
| A family member on payroll at ₹18 lakh with no real role | A buyer won't pay this | Plus ₹18 lakh |
| Personal car and travel run through the clinic, ₹8 lakh | Not a clinic cost | Plus ₹8 lakh |
| A one-off legal case, ₹15 lakh | Won't repeat, if you can prove it | Plus ₹15 lakh |
| The centre pays its owner's family ₹20 lakh below market rent for the building | A buyer would pay market rent | Minus ₹20 lakh |
Adjusted EBITDA = ₹2.20 crore − ₹0.48 crore + ₹0.18 crore + ₹0.08 crore + ₹0.15 crore − ₹0.20 crore = ₹1.93 crore.
That ₹27 lakh drop, multiplied by whatever multiple a buyer offers, is real money. Better you find it now than in a buyer's spreadsheet.
Every one of these needs evidence and your CA's judgement. Don't invent add-backs. Buyers check them line by line in due diligence, and a stretched add-back damages trust in every other number you've given.
What does EBITDA not tell you?
EBITDA is not cash. It ignores loan repayments, the incubators you'll need to replace, and money stuck with insurers or companies. An IVF centre with great EBITDA and an ageing lab still needs cash to stay current. So read EBITDA next to your cash runway, never instead of it.
A buyer knows this too. Alongside EBITDA, expect them to ask how much you spend each year just to keep equipment current, and how much cash sits unpaid with insurers and corporate clients. A centre that needs a new set of incubators next year is worth less than one that replaced them last year, even with the same EBITDA.
Track it every month, from the books your accountant closes by the seventh. A steady, rising monthly EBITDA over two or three years is what makes a buyer believe the next three years.
If you're starting to think about selling or bringing in an investor, our growth consulting begins by building a clean, monthly EBITDA view of your practice. It matters most in IVF and fertility centres, where lab equipment makes the gap between profit and EBITDA especially large.
The short version
- EBITDA = net profit + interest + taxes + depreciation + amortisation.
- It shows how well the clinic runs, before funding, tax and equipment accounting.
- Buyers use it to compare clinics and often price a practice as a multiple of it.
- Expect owner adjustments for your own pay, family on payroll, personal expenses, one-offs and rent; agree them with your CA.
- EBITDA is not cash, so always read it next to your runway.
Frequently asked questions
Is EBITDA the same as the profit my CA shows me?
No. The profit in your accounts is usually net profit, after interest, taxes, depreciation and amortisation. EBITDA adds those four back to show what the clinic earns from operations alone. Ask your CA to show both every month, along with the EBITDA margin, so you can watch the trend.
What is a good EBITDA margin for a clinic?
I don't hold one figure for every clinic, because speciality, size and model change it. What buyers want to see is a steady or rising EBITDA over two or three years, backed by clean monthly books. Compare yourself with your own past first, then ask your adviser how your margin looks for your market.
Why would a buyer reduce my EBITDA for my own salary?
Because someone has to do your job after you leave. If you pay yourself far less than a replacement specialist or medical director would cost, the buyer adjusts EBITDA down to reflect a normal salary. If you pay yourself far more, it may go up. Your CA can help you work out a fair figure.
How many years of EBITDA will a buyer look at?
Usually several years of history and the latest months, because they want to see that profit is steady and not a lucky spike. That's why I suggest tracking EBITDA monthly from clean books well before any sale. Ask your deal adviser exactly what period a buyer in your market will expect.
On a free growth call, my team traces your last month from enquiry to treatment and shows you your biggest leak in rupees.
