Project Ashgrove

Every company, facility, person, and number in this document is invented. The portfolio doing the acquiring is the same fictional one the Revenue Lab operates. The method is the artifact; it is the part that is real, and it is the framework published at Growth-Continuity Diligence.

The thesis being tested

Ashgrove House runs 12 detox and 48 residential beds at an average daily census of 38, which is 63% of licensed capacity. In-network per diems run $900 for detox days and $700 for residential days. The twelve-month export prices a detox-entry episode at $17,600 (4 detox days, 20 residential) and a direct residential entry at $15,400 (22 days); the assumed entry mix uses a rounded $16,800 planning blend across a stay of about 23 days. The monthly admission-revenue run rate is $840,000 a month, $10.1 million annualized, with EBITDA near $1.3 million. The call platform logs 340 unique inquiry calls a month, trending flat to slightly up over the twelve months exported; the baseline is not eroding. Admissions run about 50. Two coordinators share the admissions line, there is no queue and no after-hours coverage, callbacks are measured in days, and no disposition is recorded when an inquiry goes nowhere.

The acquisition thesis prices that gap as the upside: the platform’s intake infrastructure, coverage model, and admissions process lift conversion on demand the facility already receives, without a dollar of new demand spend. The pro forma models 62 monthly admissions by month six. That carries census to roughly 48 and adds approximately $200,000 of monthly revenue. At an assumed 66% contribution margin before the added $25,000 monthly intake cost, the $201,600 monthly revenue lift adds $108,056 monthly EBITDA, or about $1.30 million annually. That bridges EBITDA from $1.3 million toward $2.6 million, and the deal is priced on that bridge.

The denominator needs care. Fifty admissions divided by 340 unique inquiry calls is 14.7%; the target of 62 is 18.2%. Unique callers are not necessarily qualified inquiries. This case does not supply a qualified-inquiry denominator, so neither rate is compared with a qualified-inquiry benchmark. The 12-admission lift is an illustrative assumption to test after intake staffing and disposition records improve. The pro forma also assumes the calls keep coming. This memo tests that dependency.

Findings

1. The demand infrastructure is not in the deal. The domain, the website, the call tracking account, the paid media accounts, and the published admissions line are all held by Ashgrove Media LLC, a founder-owned entity that is not the operating company being purchased and does not appear on the draft asset schedule. The facility does not own the demand it is being priced on.

Evidence: entity records; draft asset schedule; account-ownership review in each platform.

2. Two reports describe different parts of the path. The CRM assigns 68% of admissions to referral and business development, 21% to web and 11% to other. Coordinators set and revise that field. The call export records 61% of admitted episodes first appearing on tracked web numbers, 24% on the referral line and 15% direct or unattributed. A referral can prompt a web visit, so the difference is not proof that either channel caused the admission. Reconcile definitions and episode histories before using the mix to price the forward plan. The web-number share does establish infrastructure dependence within this case.

Evidence: CRM export, twelve months; call platform first-touch export, same period; three days of coordinator observation.

3. Intake and measurement need a shared operating fix. Missed calls, days-long callbacks and absent dispositions create specific intake work. Incomplete source histories create a separate measurement problem. The plan funds coverage, a queue and consistent records together. It does not assume that more staff alone will validate attribution or that a new system guarantees the projected lift.

Evidence: call-handling observation; the platform’s intake staffing and coverage benchmarks.

4. Referral continuity needs an account-level handoff. The founder runs business development; the clinician and alumni network lives in his phone and the CRM history is sparse. The CRM’s 68% share implies 34 referral/BD-labeled admissions per month. The 24% referral-line share implies 12 arrivals through that line. Neither figure measures his personal incremental production. Map the relationships, record introductions and examine referral history alongside calls and admissions through the consulting window. The 61% infrastructure dependency remains relevant regardless of who prompted the search.

Evidence: CRM account-history analysis; founder interviews.

The inventory, walked

The framework’s transfer inventory, applied to this deal. One owner appears in nearly every line that does not transfer.

Pricing the gap

Three components: the cost to rebuild what does not convey, the launch program a new name requires, and the carry while the rebuilt system ramps. One note on the 61% this section prices from. It is not a channel-credit claim, and it does not settle the attribution question Finding 2 raises. It measures something narrower: the share of admitted episodes that entered through infrastructure that leaves with the seller. That identifies exposure, not a forecast that every dependent admission will disappear. The forward channel plan is refined as the measurement layer improves. Pricing the transition only requires knowing what leaves.

The rebuild: domain and a fully integrated site under the new brand, $25,000, where the invoice matters less than the calendar. A core site can stand in 60 days and the fully integrated version in 90, which is what sizes the continuity window below. Tracking and CRM configuration, $30,000. Brand-transition creative and collateral, $20,000. Directory and review reclamation, $10,000. Paid account rebuild, including LegitScript re-certification, $25,000. Build subtotal, $110,000.

The launch: this case assumes a new name needs a funded awareness program. The first ninety days carry a $180,000 brand-launch program layered above the run-rate paid budget: broadcast and out-of-home in the facility’s referral markets, signage, and paid social, front-loaded to prime the channels the rest of the plan harvests.

The carry is the largest component. Of admitted episodes, 61% began on web infrastructure that does not convey: 30.5 of 50 monthly admissions, or $512,400 of monthly admission revenue at the $16,800 blend, at risk if web-origin demand went dark at close. Modeled with no continuity arrangement, replacement demand recovers at 40, 55, 70, 80, 90, and 95 percent across the first six months: a cumulative shortfall of 1.7 month equivalents, or roughly $871,000 of carry exposure concentrated in the first two quarters. With the continuity window, pre-close conveyance, and the launch program above, the modeled recovery accelerates to 65, 80, 90, 95, 98, and 99 percent, a shortfall of 0.73 month equivalents, or roughly $374,000. In EBITDA terms that exposure is roughly $247,000 before intake staffing, at the same assumed 66% contribution margin the pro forma’s own bridge uses. The reserve is struck at revenue anyway, for three reasons. The clinical cost base cannot flex against a 90-day census dip. Staffing ratios hold so the facility stays ramp-ready. And this fictional covenant is assumed to test census rather than EBITDA. The trough, not the build, is the covenant risk.

The transition ask is $664,000, front-loaded: $110,000 of build, the $180,000 launch program, and a $374,000 carry reserve. The recovery curves and cost estimates are assumptions; they do not establish an avoided loss. The pro forma’s only marketing line is a $15,000 monthly continuation, and the problem with that number is larger than the transition: Harbor, the portfolio’s closest comparable at the same 60-unit scale, acquires demand at an assumed $2,600 per admission. This is a constructed planning input, not a sourced industry benchmark. At the bridged volume that implies a run rate near $160,000 a month. Crediting the founder’s referral book and the organic demand a recovered brand produces, the scenario assumes an $80,000 monthly run-rate line, about 5.3x the $15,000 continuation. The $65,000 monthly difference consumes $780,000 of the modeled annual bridge. Read it as a two-year story. Year one absorbs launch, trough and ramp costs; this memo does not calculate a full monthly EBITDA curve. Year two runs at the restated cost with census at the bridged level, and produces annual EBITDA of about $1.82 million rather than $2.6 million. The intake thesis still needs operating proof; the bridge needs these costs included.

Recommendation

Condition the deal on the demand infrastructure. The Ashgrove Media LLC assets convey on the schedule, or they are licensed through transition with a defined end. Without one of those, the intake thesis is being purchased without the demand that feeds it.

Negotiate 120 days of routing continuity. Published numbers and web traffic route to the buyer while replacements stand up. A bridge with an expiration, not a plan.

Preserve demand while measurement improves. Call tracking, source taxonomy, and CRM automation stand up in the first 30 days alongside essential continuity work, and the pre-close demand baseline is captured now, while the seller’s systems are still open to us. A transition cannot be measured against a baseline that was never recorded.

Fund the intake fix immediately. Two intake specialists, after-hours coverage, and the systems stack that runs the queue and supports source and disposition records: roughly $25,000 a month, carried on the payroll line rather than the marketing line restated above, against the $200,000 a month of revenue the lift produces. The systems are the point. Automate record linkage where supported, preserve documented manual inputs and keep unresolved sources visible. The people handle the inquiries; the system supports review.

Give the founder a defined hand-off. A consulting window matched to the continuity period, and a referral institutionalization plan measured monthly: accounts moved from his phone into facility-owned relationships.

Provide $664,000 of front-loaded transition capital for the build, launch program and carry reserve. Separately, restate ongoing demand generation at $80,000 per month in place of the pro forma’s $15,000 continuation allowance.

Re-cut the model to month nine, and restate the demand line. We do not believe the month-six lift survives a contested conveyance negotiation and a brand launch running in the same quarter, and the run-rate marketing line above changes the bridge the deal is priced on. Both changes belong in the underwriting discussion before signing.

These findings bear on transition capital, the first two quarters’ operating plan, and the pace at which the intake thesis can be proven. This memo carries no opinion on price and no go or no-go; that is the committee’s work, and financial and clinical diligence are running their own processes. One dependency belongs to that lane and is named here because every dollar above sits on it: the rates in this memo are in-network, and payor contract conveyance and re-credentialing timelines are being confirmed by financial diligence. The projections assume both survive close.

The first hundred days

The post-close half of the same work. Each phase closes on an observable condition, not a date that arrives regardless.

Days 0 to 30. Measure and staff. Routing continuity live on day one. Buyer-owned call tracking and a written source taxonomy replace the LLC’s accounts. CRM source and disposition fields populate automatically wherever a system can set them. The pre-close baseline is archived. The intake standup begins: queue, after-hours coverage, dispositions, and the platform staffing model. The founder’s referral network is mapped account by account while he is most engaged. The new brand and site build start now, and LegitScript re-certification is filed the day the new domain can stand for review, because those two calendars are the longest in the plan. Complete when every inquiry has a disposition and a source or explicit unknown, manual changes are traceable, and callback timing is measured against the agreed standard.

Days 31 to 60. Rebuild, launch, cut over. The core site stands by day 60 under the portfolio’s brand architecture. The launch program opens with it: broadcast, out-of-home, and signage in the referral markets, buying the awareness a new name does not have. Directory and review reclamation filed against the transferred Business Profile. Transferred creative redeployed under the new brand. Paid accounts rebuilt and held pending certification. The founder’s reintroductions run account by account, with the first monthly review done. Admissions retraining lands the new taxonomy. Complete when the facility’s demand runs on buyer-owned infrastructure except the continuity routing, with a core site to land on.

Days 61 to 100. Ramp and institutionalize. Paid channels relaunch onto the core site once the measurement gate has passed and certification has cleared, and the plan expects their learning-period inefficiency instead of reacting to it. The fully integrated site is complete by day 90. Step-down routing opens into the portfolio’s PHP and IOP arc, a continuity Ashgrove never had on its own. Be clear-eyed about what that does to the numbers above. The model assumes shorter residential stays where clinically appropriate step-down becomes available, and the step-down block of each episode lands at Waypoint instead of Ashgrove. The facility-level census and episode figures in this memo will not survive the integration that makes them worth having; the portfolio captures what the facility gives up. Strike the bridge, and any facility-level covenant or earn-out, at portfolio level. Referral accounts move to facility ownership on the monthly cadence, measured against referral-sourced admissions. Executive reporting settles into weekly census and source-level admissions. Complete when nothing still depends on the continuity window, which expires by design at day 120.

Day 100: Ashgrove House enters the portfolio operating model alongside Northstar, Harbor, and Waypoint. The hold period is operated in the Revenue Lab.