Overhead — it’s one of those sneaky things that quietly chips away at your profitability if you’re not paying attention. The higher your overhead percentage, the harder it is to actually keep what you earn. But the good news? You have more control over it than you might think.
At the end of the day, lowering your overhead comes down to two simple levers:
✔ Spend less
✔ Boost your profit margin
Easier said than done? Maybe, but with the right strategy, it’s absolutely doable. Start by digging into your expenses. Break them down into fixed and variable costs and look for the areas where you can trim the fat. Renegotiating with your suppliers and labs is another smart move, you’d be surprised how often you can secure better pricing just by asking.
Next, turn your attention to scheduling. The more efficiently you fill your chair time, the more productive your days become without adding more overhead to the mix. And don’t forget about outsourcing. Handing off tasks like billing or administrative work can free up your time and often costs less than keeping everything in-house.
Bottom line: overhead may be inevitable, but letting it run the show? That’s optional.
Nine out of ten times, a tight profit margin is the big reason you have high overhead. To get started on increasing it, you need to understand an important truth: you spend your overhead in order to produce your dentistry, BUT you calculate your overhead against your revenue. So if there’s a big gap between your Gross Production and your Revenue due to write-offs and not collecting 100% of your Net Production, it means your Overhead will be artificially high. The bigger the gap, the higher your overhead will be.
Unfortunately, there’s no magic benchmark for a profitable dental practice, but in general, if your Overheard is 60%, you’re in a good position. When you see it start creeping higher, however, then ask yourself two crucial questions:
- What would my overhead be if I collected 100%?
- What would my overhead be if I collected my Gross Production?
That will tell you whether it’s high because you’re spending too much, or because your profit margin is too tight. And once you know that, then you can implement the countermeasures you need to get it under control and start being more profitable.
