> ## Documentation Index
> Fetch the complete documentation index at: https://dso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Find and value a practice
> How Bluebird sources its second practice, reads the seller's P&L past the broker's cash-flow number, applies single-practice EBITDA multiples, and structures the offer to a retiring dentist.
One common way to value a dental practice is to reconstruct maintainable earnings by removing supportable seller-specific expenses and deducting realistic replacement-clinician compensation, then apply a market-derived multiple. Asset value, collections, specialty, buyer type, financing, deal terms, and state-law constraints can support different methods or adjustments. This page follows Bluebird's fictional underwriting from the first conversation to a signed letter of intent (LOI). It is not an appraisal or a statement of current market value.
## Sourcing the practice
Bluebird uses two sourcing channels:
* **Transition brokers.** Many retiring solo dentists use a regional practice-transition broker, who may produce a prospectus, run the process, and represent the seller. Broker listings are one visible part of the market; the prospectus numbers are inputs to test, not independently verified value.
* **Direct outreach.** Sam maintains a list of solo dentists within 30 minutes of Bluebird's first location who are 25-plus years into practice, and Dr. Okafor keeps her ear open at the local study club. Direct deals may avoid a broadly marketed process, but another buyer can still emerge and the seller should have independent advisers.
Dr. Okafor hears at study club that **Dr. Ellis**, 64, is talking to a broker about retiring. Sam follows up directly, then receives the broker's prospectus:
| Prospectus line | Claimed |
| -------------------- | --------- |
| Annual collections | \$948,000 |
| "Cash flow to owner" | \$342,000 |
| Active patients | 2,150 |
| Operatories | 4 |
| Asking price | \$975,000 |
Bluebird will test each number in [diligence](/start/first-acquisition/run-diligence). At this stage, it is deciding whether to issue an LOI and what price to propose.
## Reading the P\&L: from "cash flow" to post-doc EBITDA
In Bluebird's fictional prospectus, "cash flow to owner" is the broker's collections-minus-operating-expenses measure before a replacement dentist charge. Bluebird does **not** apply the cited EBITDA multiple range directly to that number. It first reviews two adjustments:
1. **Claimed seller add-backs.** A solo owner's P\&L may contain seller-specific expenses. Bluebird provisionally adds back Dr. Ellis's truck lease, travel, and family payroll only after testing the business purpose, documentation, actual cessation, and any replacement cost. An add-back is not valid merely because a broker labels it one.
2. **Replacement clinical compensation.** Dr. Ellis pays himself with the profit. After closing, Bluebird expects Dr. Ellis to stay for a year and an associate to take over later. The model deducts the compensation required to produce that dentistry before calculating earnings. Some dental transaction advisers call the result **post-doctor or “post-doc” EBITDA**, and some dental support organization (DSO) buyers use it in pricing. Definitions and adjustments are not standardized, so the LOI and valuation work should define the measure line by line.
Sam rebuilds the P\&L:
| Line | Amount |
| --------------------------------------------------------------------------------- | ------------- |
| Broker's "cash flow to owner" | \$342,000 |
| + Add-backs (vehicle, travel, family payroll) | + \$36,000 |
| = Normalized owner benefit | \$378,000 |
| − Replacement dentist compensation (Bluebird's model, for Dr. Ellis's production) | − \$210,000 |
| **= Post-doc EBITDA** | **\$168,000** |
The replacement-compensation line is Bluebird's own model and a sensitive underwriting input. Sam starts from what Bluebird pays at location one, then adjusts for provider productivity, specialty, benefits, recruiting conditions, schedule, and geography. Lowering the assumption increases modeled EBITDA without improving the practice itself.
For a directional comparison, the cited secondary source describes general-practice overhead around 55–65% of collections, staff at 25–30%, and lab at 6–8%; these are not valuation standards and may not match specialty, geography, accounting classification, or the practice's service mix. See [DSO economics](/concepts/finance/dso-economics).1 Bluebird treats Dr. Ellis's roughly 60% overhead before owner compensation as a diligence starting point, not proof of quality.
## What multiples mean for a single practice
The cited transaction advisers publish 2024–2026 marketing ranges of roughly **5–8x EBITDA for some single-location general practices**, 7–9x for some regional groups, and 9–12x+ for assets they describe as platform-grade.2 These are broker/adviser claims, not a comprehensive closed-deal dataset, appraisal standard, or offer guarantee. Before using them:
* **The cited ranges are expressed against adjusted or post-doctor EBITDA.** That does not make EBITDA the only permissible valuation method or make every buyer's adjustments comparable. Bluebird's fictional $168,000 at 5–8x produces $840,000–\$1.34 million before debt, working capital, holdbacks, transaction structure, or diligence adjustments.
* **They are directional, not appraisals.** Treat each range as dated, source-specific marketing material and test it against actual comparable transactions and a qualified valuation professional where appropriate.
* **Multiple expansion is an underwriting assumption, not inherent value.** A larger group may attract a different multiple, but aggregation alone does not guarantee one. Scale, concentration, growth, governance, margins, market conditions, buyer demand, and integration results all matter. See [DSO economics](/concepts/finance/dso-economics).
For the teaching example, Sam selects the low-middle of the cited range because the model assumes heavy owner dependence and an aging facility but a healthy hygiene program. Bluebird's **\$920,000** indication is about 5.5 times its own modeled post-doc EBITDA. It is a fictional negotiating position, subject to confirmatory diligence, financing, definitive documents, and the seller's response, rather than a recommended price.
## What Bluebird offers Dr. Ellis
**Structure: an asset purchase.** Bluebird allocates assets only after checking which party may own them under state dental law. The purchase agreement separately addresses lawful record custody and access, active patient obligations, liabilities, and transition services. Buying Dr. Ellis's professional entity would preserve that legal entity but could also preserve historical liabilities and still trigger payer notices, consents, or recredentialing. An asset purchase may require new enrollments and does not guarantee a clean liability break. Bluebird therefore requests each payer and program's written transaction requirements at LOI.3 The full structural decision tree is in [Acquire a dental practice](/guides/growth/acquire-a-dental-practice), with the evidence map in the [dental transaction issue-spotter](/reference/legal/dental-transaction-issue-spotter).
**Consideration: cash, because the seller is retiring.** The cited sell-side advisers describe some DSO transactions for continuing sellers as mixes of cash, rollover or joint-venture equity, and earnouts, including illustrative 60–80% cash and 15–30% equity ranges.4 Those are not market-wide terms or a recommendation; economics vary with buyer, seller role, risk, tax, financing, specialty, and documents. Fictional Dr. Ellis does not want equity, so Bluebird models cash at close with a holdback released at 12 months under negotiated purchase-agreement terms.
**The seller stays one year in Bluebird's model.** Dr. Ellis signs a 12-month employment agreement with the PC covering compensation, a tapering schedule, and his transition role. Bluebird assumes his continued presence may support patient and team retention, but the effect and suitable term are deal-specific and neither is guaranteed. The agreement is drafted like any [dentist employment agreement](/guides/agreements/draft-dentist-employment-agreements), with the usual attention to what a DSO may and may not control. Bluebird also completes each payer's required provider-linkage or credentialing step for Dr. Ellis under the post-closing billing arrangement.
Before sending the LOI, review the target state's corporate-practice, ownership, entity, and filing rules. Depending on the state, the regulated party may be the DSO, dental manager, dental business entity, non-dentist owner, or professional entity. Confirm the relevant path against [DSO laws by state](/reference/legal/dso-laws-by-state) before drafting the transaction documents.
## The LOI
Bluebird's LOI is three pages:
* Price (\$920,000) and structure (asset purchase; allocation to be agreed), **expressly subject to confirmatory diligence**
* Exclusivity: 90 days, extendable by mutual agreement
* A diligence window and a data-request list attached as an exhibit; the reports in the [next step](/start/first-acquisition/run-diligence)
* Dr. Ellis's 12-month employment terms in outline
* **A credentialing covenant**: from signing, Bluebird gets the practice's full payer participation list, copies of payer contracts and fee schedules, and Dr. Ellis's cooperation on credentialing paperwork
The credentialing covenant lets payer work begin without waiting for basic seller information. At LOI, Bluebird requests each payer's written transaction instructions and begins only the applications, notices, or consent processes that payer permits. Payer timing may outlast the modeled closing schedule, but it varies by payer and transaction.
## Next
The reports Bluebird demands, and the finding that reprices the deal.
## Sources
1. ZenOne, [dental practice overhead benchmarks](https://www.zenone.com/blog/dental-practice-overhead-benchmarks-are-you-spending-too-much/) (secondary-source ranges); ADA HPI, [dental practice research](https://www.ada.org/resources/research/health-policy-institute/dental-practice-research) (primary research hub, not support for every range in the secondary article).
2. McLerran & Associates, [Dental practice sale multiples: 2026](https://dentaltransitions.com/articles/dental-practice-sale-multiples-2026/); Focus Investment Banking, [dental practice EBITDA](https://focusbankers.com/dental-practice-ebitda/); Large Practice Sales, [2024 results](https://largepracticesales.com/blog/quick-thoughts-on-2024-results-and-2025-practice-values/). Broker- and adviser-reported ranges.
3. Aetna, [provider education: demographic and TIN changes (PDF)](https://www.aetna.com/document-library/health-care-professionals/Q4-provider-education-week-remediated.pdf); Delta Dental, [dentist FAQs](https://www.deltadental.com/dentist/dentist-faq/); CMS, [NPI FAQs](https://www.cms.gov/priorities/key-initiatives/burden-reduction/administrative-simplification/unique-identifiers/faqs).
4. Professional Transition Strategies, [the 5 DSO deal structures](https://professionaltransition.com/5-types-of-dso-deal-structures/); McLerran & Associates, [selling a dental practice to private equity](https://dentaltransitions.com/articles/selling-dental-practice-private-equity/) (August 2026).