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Overhead Expenses for a Dental Practice

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Budgeting for a dental practice is a delicate task that must be done properly in order to establish a lucrative business. Furthermore, it is critical to control overhead in order to achieve long-term success. The main components of overhead include 1) payroll, 2) lab costs, 3) occupancy costs, 4) supplies, 5) advertising, and 6) administrative fees.

Payroll includes employees’ salaries, worker’s compensation insurance, etc. Ideally, payroll should be kept at under 25% of the total budget. By keeping payroll under 25%, it is possible to give benefits or bonuses when deserved. This should be a fixed expense, but should leave room for flexibility when necessary.

Lab costs should be kept below 10% of the total. This varies depending on how much crown/bridge work is done at the particular practice. However, using an out-of-area lab (that may be cheaper than local labs) can reduce costs. Lab fees will vary greatly, depending on the practice’s emphasis on specific prosthodontics procedures.

Occupancy costs include rent, maintenance, mortgage, etc. This value should be kept at around 5% of the total budget. Occupancy costs are not variable. The cost of supplies is also fairly non-variable. Supplies, including both dental and office supplies, should be kept at around 10% of the total.

If an office chooses to partake in advertising, it should be kept at 1% to 5% of the total. This cost is variable since a practice’s needs may change periodically. Nevertheless, the benefits of effective marketing usually far outweigh the initial investment. Lastly, administrative fees include all miscellaneous costs not falling into any other category. These may include CE courses, equipment repairs, or professional fees. Although the month-to-month expense may vary, it is reasonable to estimate this category to remain around 10% of the total budget.

Once overhead is accounted for, approximately 20% to 25% remains for the doctor’s salary and another 20% to 25% remains for retirement/reinvestment. While this approach can be customized by each practitioner, keeping overhead as low as possible, without compromising quality, is an excellent approach for financial success.