The overhead of a dental practice refers to the expenses that are necessary to run the practice and provide dental services to patients. These expenses include rent or mortgage payments for the office space, utilities such as electricity and water, salaries and benefits for staff, dental supplies and equipment, insurance, marketing and advertising costs, and other miscellaneous expenses.
The median dental practice overhead is typically around 75% of collections, which means that for every dollar collected from patients, 75 cents goes towards covering the overhead expenses. This leaves only 25 cents per dollar for the practice owners and associates to take home as profit.
To put this into perspective, let’s say a dental practice collects $1 million in revenue for a year. With a 75% overhead, $750,000 would be used to cover the expenses of running the practice, leaving only $250,000 available for the owners and associates to divide amongst themselves. This amount may need to cover the salaries of the owners and associates, as well as any other profit-sharing arrangements in place.
Lowering the overhead by just 10% can have a significant impact on the profitability of the practice. In the case of our example, reducing the overhead by 10% would result in a savings of $75,000. This would increase the available profit for the owners and associates to $325,000 per year, an additional $100,000 compared to the original overhead.
Reducing overhead can be achieved through various strategies. One approach is to negotiate better deals with suppliers to lower the cost of dental supplies and equipment. This could involve exploring different suppliers, comparing prices, and negotiating bulk discounts. Another strategy is to optimize the use of office space, ensuring that it is efficiently utilized and not wasted. This could involve rearranging the layout of the practice, implementing flexible scheduling, or sharing space with other practitioners.
Staffing costs can also be a significant portion of the overhead, so optimizing the number of staff members and their productivity is essential. This can be achieved by analyzing the workflow and identifying any inefficiencies or bottlenecks. Implementing appropriate systems and training can help improve productivity and reduce staffing costs.
Additionally, it is important to regularly review and assess all expenses to identify areas where savings can be made. This could involve renegotiating contracts with service providers, such as insurance companies or marketing agencies, or finding more cost-effective alternatives.
It’s worth noting that while reducing overhead is important for increasing profitability, it should not come at the expense of providing quality patient care. Cutting corners on essential supplies or compromising on staff training and development could have negative consequences for the practice in the long run.
The overhead of a dental practice typically accounts for around 75% of collections. Lowering overhead by 10% can result in a significant increase in profit available for the owners and associates. Implementing strategies to reduce costs, optimize resources, and negotiate better deals can help achieve this goal while maintaining the quality of patient care.