The last few years have been a rollercoaster of overhead costs in dental practices. You've had a labor market tighter than a pair of skinny jeans, but it came with booming business followed by a sudden slowdown out of left field this past year.
There has been very little consistency, leaving you questioning where your dental practice stands and how your practice compares to everyone else. Fortunately for you, as a dental practice, there is an easy and efficient way to monitor where your practice stands. It's known as dental practice overhead percent benchmarking.
What are dental practice overhead percentages?
Dental overhead percentages (also known as benchmarks) are simply averages or standards for how much a practice spends in different categories of expenses. When you group all the expenses from your Profit & Loss report into just six overhead categories, then divide each category against your collected income, you get a percentage of income for each category.
The percentage is how much you spend in proportion to your income. With your expenses transformed into a percentage of income, you get your practice on a level playing field with other practices, no matter how big or small your practice is compared to others. You're essentially figuring out how well you spend your income and how profitable you are with your operations compared to how well other practices spend their income.
2024 Percentology dental practice overhead averages:
Percentology only does bookkeeping for dental practices, and we do it specifically for benchmarking overhead percentages (outside of tax needs, of course). Therefore, we ensure the bookkeeping is done exactly the same for every practice, giving the most reliable overhead benchmarks you'll ever encounter.
Below, I am reporting the 2024 Percentology client average overhead percentages, allowing you to compare your practice against 100+ actual practices in real time. In the column to the right of our averages, you will find the Industry Standard that comes from Dental CPA firms and consultants.
2024 General Dental Practices Overhead Percentages:
Overhead Category | Percentology Average | Industry Standard |
|---|---|---|
Personnel (Team) Costs | 29.1% | 25-28% |
Clinical Costs | 11.6% | 12-14% |
Facility & Equipment Costs | 10.2% | 10% |
General Business Costs | 10.7% | 11% |
Discretionary Costs | 2.0% | 0-2% |
Total Overhead Costs (above) | 63.6% | 60-65% |
Doctors, Other, & Profit | 36.4% | 35-40% |
2024 Pediatric Dental Practices Overhead Percentages:
Overhead Category | Percentology Average | Industry Standard |
|---|---|---|
Personnel (Team) Costs | 25.9% | 25-28% |
Clinical Costs | 7.5% | 6-8% |
Facility & Equipment Costs | 8.0% | 8-10% |
General Business Costs | 10.1% | 11% |
Discretionary Costs | 1.7% | 0-2% |
Total Overhead Costs (above) | 53.2% | 50-55% |
Doctors, Other, & Profit | 46.8% | 45-50% |
2024 Dental Overhead Observations:
Keep in mind that we do not work in these practices. So, when I review the trends, I try to piece together what's happening by listening to our clients and understanding current economic activity. Still, it's just my interpretation, so take everything I tell you here with a grain of salt and use my interpretations as a starting point to dig more into your own numbers.
Personnel Costs:
In 2024, hiring drastically changed; employee turnover was almost non-existent as hiring declined and people needed to hang on to their jobs. As a result, wages stabilized. However, the numbers don't reflect this because the average Personnel costs are still too high, specifically for general practices. So here is my theory: much of the elevated Personnel costs might have to do with employee benefits, not just wage rates.
Looking at the averages of gross earnings (before benefits) in each department across our clients, this is what I'm seeing for General Practices:
Department | Percentology Average | Industry Standard |
|---|---|---|
Gross Pay - Hygienists | 9.5% | 10% |
Gross Pay - Dental Assistants | 7.6% | 7-8% |
Gross Pay - Office/Admin | 7.5% | 7-8% |
Employee Benefits:
As you can see above, the gross earnings look pretty normal in 2024 and meet the industry standards that have been used for many years. However, many practices started adding or enhancing employee benefits to remain competitive in the tight labor market during 2021-2024.
Unfortunately, during that time, health insurance premiums also increased in cost significantly across the board, by an average of 7-9% year-over-year. Then, add the pension (401k, Simple IRA) with matching calculated on the higher wage rates, and you're growing your personnel costs by as much as 2-3% of your income. To put that into perspective, for a $3M revenue practice, that is $90,000 more for employee benefits.
When reviewing benefit costs, it's important to consider how benefits affect attracting quality hires and reducing employee turnover. With employee benefits, you're getting the best candidates and keeping them longer. So, I suggested to clients struggling with the increase in premiums that they keep the group insurance for their team but maybe offer less contribution towards the employee premiums by the practice. It's impossible to get good insurance coverage as an individual, so just having access to the insurance is still a win for them and much better than the alternative of removing it altogether.
Advertising & Marketing:
I know many of you have been experiencing a slowdown in 2024. With this slowdown, there has been a significant uptick in advertising and marketing efforts across practices, increasing the General Business costs as a percentage of income.
Year | Expense | Percentology Average |
|---|---|---|
2019 | Advertising & Marketing | 1.6% |
2020 | Advertising & Marketing | 1.6% |
2021 | Advertising & Marketing | 1.7% |
2022 | Advertising & Marketing | 1.7% |
2023 | Advertising & Marketing | 1.9% |
2024 | Advertising & Marketing | 2.4% |
To Be Continued...
It's January 2025 when I'm writing this post. Dentists have barely just closed the year, and I haven't had much time yet to review the final results. I'm lucky I have an incredibly efficient team and over 100 responsive clients, so we could put these averages out for you now. There is more I want to analyze, so I will return here and update this post with my findings.
In the meantime, download our free overhead benchmark template to get our email updates. I'll let you know when I add more findings for 2024 here (and bonus, the emails will include current-year updates too).
Thank you so much!
Sona Wegner, MBA
CEO | Percentology
Keeping track to control overhead costs:
All winners are trackers. Every business guru is constantly out there talking about the importance of tracking your numbers. A better example would be professional athletes though. Winners. They don't get to the top without being obsessed with tracking their numbers. If you don't track and measure your progress, you can't improve, and that includes your overhead costs. So, if you want to be a winner and get control of your expenses, you should be tracking and benchmarking your overhead costs.
Download our free Dental Overhead Benchmark Template:
Discover how your practice spending compares against other practices without paying the high cost of a Dental CPA. Just drop your numbers right from your Profit & Loss report into the spreadsheet.
