The benchmark is 60% overhead. You might be at 72%. That gap is $120K.
Ask most dental practice owners their overhead percentage and they'll give you a number. Ask them how they calculated it and you'll get a different answer every time.
The industry benchmark for a well-run general practice is approximately 60% overhead. That means for every dollar of production collected, $0.60 goes to costs and $0.40 goes to the doctor.
Many practices are running at 70–75% overhead. On a practice producing $1.2M annually, the difference between 60% and 72% overhead is $144,000 in annual profit. That's not revenue. That's take-home money.
And the worst part: most practices at 72% don't know they're at 72%. They think they're at 63%.
How the overhead creeps in
Nobody decides to run a practice at 72% overhead. It happens through a series of small, individually rational decisions that compound:
Staffing drift. You hired an extra front desk person because the phones were getting overwhelming. You gave everyone a 4% raise because you had to — they'd leave otherwise. You added a part-time hygienist because you felt you needed the capacity. Each decision made sense in isolation. Together, your payroll went from 28% to 34% of collections.
Staff costs are the single largest overhead component, typically 25–30% of collections in a well-managed practice. Going 4–5 points over that benchmark on a $1.2M practice is $48,000–$60,000 in additional overhead.
Technology accumulation. Practice management software. Digital imaging. 3D scanner. CEREC mill. Patient communication platform. Each one has a monthly or annual cost. Each one was justified by a rep who showed you the ROI. But the cumulative effect of 8–12 technology subscriptions and equipment lease payments adds 5–8% to overhead in many practices.
Facility expansion before production supported it. You moved to a bigger space or added operatories based on projected growth. The production didn't materialize as fast as the lease payments. Now you have six rooms but only enough production to justify four — and you're paying rent on all six.
Invisible costs. Lab fees that crept up 3% without you noticing. Supply costs that shifted because your usual rep left. Credit card processing fees. Continuing education. Small expenses that individually seem negligible but collectively represent 3–5% of overhead that nobody is monitoring.
The benchmarks that matter
Here's what a well-run general practice targets for the major overhead categories:
- Staff costs: 25–30% of collections (including benefits, taxes)
- Facility: 5–7% of collections (rent, utilities, maintenance)
- Lab fees: 8–10% of collections
- Supplies: 5–6% of collections
- Marketing: 2–5% of collections
- Administrative/other: 3–5% of collections
- Total overhead target: 55–63%
If you haven't calculated your actual numbers against these benchmarks, you're managing blind. And "managing blind" is how practices end up at 72% overhead while thinking they're at 63%.
The tax-time discovery
Here's the pattern: practice owner works hard all year, feels like business is good, sees decent production numbers. Tax time comes. Accountant runs the numbers. Owner discovers they netted 28% instead of the 40% they expected.
The $144,000 gap between 60% and 72% overhead didn't show up in any single month. It accumulated across 12 months of small overages in staffing, supplies, technology, and facility costs. By the time you see it, the money is gone.
The practices that stay at 60% or below don't have a magic formula. They track overhead monthly. They compare actuals to benchmarks. They catch drift when it's $2,000/month instead of waiting until it's $12,000/month.
The fix isn't cutting — it's seeing
The instinct when you discover high overhead is to cut. Fire someone. Cancel subscriptions. Move to a smaller space.
That's often the wrong move. The right move is understanding which costs are generating revenue and which ones aren't.
A hygienist who costs $85,000/year but produces $200,000 is not overhead — she's profit. A technology subscription that costs $500/month but nobody uses is dead weight. A sixth operatory that's only in use 3 days a week might need more scheduling, not elimination.
You need visibility into which costs drive revenue and which ones just drive overhead percentage. The answer is almost never "cut everything" — it's "invest in what works and eliminate what doesn't."
See your real overhead — categorized and benchmarked
We pull your practice financial data and break your overhead into categories against dental-specific benchmarks. We show you exactly where you're over, why, and which adjustments generate the most profit improvement.
Not theory. Your numbers.
Call (507) 577-5982 or book a discovery call.
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