Figure 1: Median GP revenue and overhead
How does your
overhead compare to
Roger P. Levin, DDS
We have entered a new era of dentistry in which automatic
growth is no longer guaranteed and new patients are harder
to attract. In fact, recent data indicates that dentist incomes
have declined in real dollars during the last decade. According to the ADA, dentist incomes, when adjusted for
inflation, “have decreased significantly since the peak value
of $215,876, which occurred in 2005, and have actually
decreased since 2009, the end of the Great Recession.” 1 By
managing overhead more effectively, in many cases dentists
can increase their income dramatically.
Using data from the ADA and Bureau of Labor Statistics,
along with proprietary sources, the Levin Group Data
Center conducted an extensive analysis of overhead for
general and specialty practices. The results of this analysis
yielded several surprises:
1. High overhead—The median overhead for all practices
is 74.62%, which is extremely high.
2. Nearly identical overhead for general and specialty
practices—The median overhead for general practices
and specialty practices was virtually the same at 75%
and 74.9% respectively.
3. Little difference between successful and struggling
practices—The overhead for high-performance and
low-performance practices was very similar for GPs
( 76.48% vs. 78.03%) and specialists ( 76.47% vs. 74.32%).
To learn how to run a
more profitable, efficient,
and satisfying practice,
come to DR. LEVIN’S
“Building the Superior
Practice.” Pick a seminar
date and location that fits
your schedule at www.
WHY HIGH OVERHEAD HURTS DENTISTS
Our findings reveal that the majority of practices are operating
at high overhead levels. Levin Group recommends much
lower overhead targets for general and specialty practices:
For dental practices, every cost not associated with
dentist income is considered overhead, including employee
compensation, rent or mortgage, supplies, equipment, and
utilities. Our analysis revealed that general and specialty
practices—no matter their level of production—were paying
between 74 and 78 cents out of every dollar they made in
overhead to fund their business operations. Even a small
reduction in overhead can reap huge dividends.
Let’s look at an example. The owner of a practice generating $1 million in production with an overhead of 75%
would pay $750,000 in expenditures and earn an income of
$250,000. However, if this dentist were able to reduce expenses by 5%, he or she would gain $50,000 in additional
income. For every percent overhead is reduced, the dentist
increases his or her salary by $10,000. For practices generating far less in revenue, the savings can still be significant.
A 5% reduction in overhead for a practice producing $500,000
annually would net $25,000 in additional income.
GPS AND SPECIALISTS—DIFFERENT BUT THE SAME
In Levin Group’s experience, general practices typically have
higher overhead than specialty practices. The GP business
model is based on providing a wide variety of low-cost dental
services to a high volume of patients, necessitating greater
expenditures. For the most part, the specialty practice model