Overhead is the largest single determinant of dental profitability, and most owners are estimating their own number rather than measuring it.
Overhead percentage — total operating cost against collections — explains more of the variance in dental owner earnings than any other single measure. It is also the number owners are most likely to quote from memory, from a benchmark they read once, or from a figure their accountant mentioned years ago.
Before asking why it is high, it is worth confirming what it actually is. Overhead computed against production rather than collections will read several points better than reality.
The usual causes, in order.
- Staff cost, measured against collected dollarsThe largest component by some distance, and the one most sensitive to scheduling density. Headcount that made sense at one volume does not automatically make sense at another.
- Supply and lab cost driftRarely a sudden problem, usually a slow one. Worth reading as a percentage over a rolling twelve months rather than month to month.
- Facility cost against capacity usedRent is fixed; the revenue per operatory it supports is not. A practice using six operatories four days a week carries the cost of six operatories seven days a week.
- Provider compensation structureAssociate agreements written against production rather than collections shift the collection risk onto the practice and raise effective overhead.
- Software and subscription accumulationIndividually small, collectively significant, and almost never reviewed once installed.
How to tell which one it is
The reason overhead is difficult to attack is that it is not one number. It is five or six cost centers with different drivers, and the aggregate percentage tells you only that something moved.
Reading each component as a percentage of collections, tracked over a rolling twelve months, turns a single alarming figure into a short list of specific decisions.
Frequently asked.
What is a good overhead percentage for a dental practice?
It varies by practice type, region and whether the owner is producing full-time, which is why a single benchmark figure is of limited use. What matters more is the trend in your own number and how each cost center is moving within it.
Why is my dental practice overhead so high?
Most often staffing measured against collected dollars, supply and lab drift, facility cost against capacity actually used, provider compensation written on production rather than collections, or accumulated software subscriptions.