Dental Practice Overhead Breakdown

Overhead costs include every expense required to keep your dental practice running, excluding your own direct compensation. According to the ADA, the average practice overhead accounts for about 62% of production.

Overhead costs generally fall into four main categories: staffing, facility, administrative, and lab fees.

• Staffing Costs: Usually the largest category, making up about 25–30% of revenue. This covers salaries, benefits, and taxes for hygienists, dental assistants, and administrative staff.

• Facility Costs: Rent, mortgage, utilities, and maintenance typically consume around 5% of total revenue. Negotiating better lease terms and reducing energy usage can help manage these expenses.

• Administrative Costs: Office supplies, insurance premiums, and software subscriptions usually represent up to 10% of revenue. Effective office management and smart technology choices can keep these costs in check.

• Lab fees: The cost of using a lab to create crowns, dentures, etc. typically runs up to 10% of your revenue.

Additional Financial Metrics to Track

Beyond overhead percentages, tracking key performance indicators (KPI) offers deeper insights into financial health:

• Gross Profit Margin: Shows how well revenue covers direct costs. A higher margin indicates more funds are available to cover indirect expenses and generate profit.

• Net Profit Margin: Reflects overall profitability after all expenses. This metric helps you understand how much profit you retain from your revenues.

• Expense Ratio: Illustrates how total expenses compare to overall income, helping you see what portion of your revenue is consumed by expenses.

Regularly tracking these metrics can reveal where you can improve. If overhead consistently runs high compared to industry norms, consider renegotiating leases, adjusting staffing, or seeking more cost-effective suppliers.

How to Reduce Overhead Costs

Running a dental practice means balancing high-quality patient care with smart financial decisions. Overhead costs can quickly eat into profits if not carefully managed. Fortunately, reducing expenses doesn’t have to mean cutting corners. It’s about being strategic—making informed decisions that lower costs while maintaining excellent service. 

Here are several ways to trim overhead and improve profitability in your practice.

Optimize Staffing

Labor is often the biggest expense in a dental practice and inefficiencies in patient scheduling and staffing levels can drive costs higher than necessary. 

One of the simplest ways to reduce payroll expenses is by aligning staffing with actual patient demand. Reviewing appointment patterns can help identify slow periods when fewer team members are needed. Instead of overstaffing during these times, adjusting schedules accordingly keeps labor costs under control.

Hiring part-time or temporary staff for peak seasons can also help manage costs without long-term salary commitments. 

Another way to optimize staffing is by outsourcing non-clinical tasks. Billing, insurance verification, and even patient scheduling can be handled by third-party services at a fraction of the cost of hiring full-time staff.

Reduce Supply and Lab Expenses

Dental supplies and lab fees make up a significant portion of overhead, yet many practices continue ordering from the same vendors without checking for better pricing. Comparing suppliers and negotiating for discounts can lead to significant savings. Vendors are often willing to lower prices, especially if they know you’re considering other options.

Buying in bulk through group purchasing organizations (GPOs) is another way to reduce supply costs. These organizations negotiate lower prices by pooling orders from multiple practices. If a GPO isn’t an option, working with a few different suppliers rather than relying on one can create competition and better pricing.

Lab costs are another area where small changes can make a big impact. Using in-network labs that work with major insurance providers often results in lower fees. Some practices choose to invest in in-house milling technology for crowns and bridges, which reduces reliance on external labs and can lead to long-term savings.

Lower Rent and Utility Bills

Lease agreements aren’t always set in stone. If the lease is coming up for renewal, negotiating better terms can lead to lower rent or improved conditions. Landlords are often willing to offer a discount in exchange for a longer lease commitment. If moving to a different location is an option, comparing rents in nearby areas may reveal more cost-effective spaces.

You can also lower utility costs by switching to LED lighting, using energy-efficient appliances, and adjusting thermostat settings. Even small changes, such as installing motion-sensor lighting in restrooms and staff areas, prevent unnecessary energy use.

Reduce No-Shows and Cancellations

No-shows and last-minute cancellations leave empty slots in the schedule that could have been filled with paying patients. Automated appointment reminders via text, email, or phone call help patients remember their visits. Some practices also implement cancellation fees to encourage patients to provide notice when they can’t make an appointment.

Offering more flexible scheduling options, such as early morning, evening, or weekend appointments, can also reduce no-shows. Many patients struggle to fit dental visits into their work schedules, and providing more options makes it easier for them to keep their appointments. Keeping a short-notice cancellation list allows staff to quickly fill empty slots with patients who are willing to come in at the last minute.

Use Technology to Cut Costs

The right technology can reduce expenses over time. Cloud-based practice management software eliminates the need for expensive servers and IT maintenance. Digital patient forms and electronic billing reduce paper and printing costs while streamlining administrative tasks.

Teledentistry offers another way to optimize resources. Some follow-up visits and consultations can be handled virtually, reducing the need for in-person appointments. This frees up time for procedures that require in-office visits while still generating revenue from remote consultations.

You can also consider implementing AI solutions to make processes more efficient and save money in the long run. 

Lower Overhead with Smart Staffing

Lowering overhead costs in a dental practice comes down to smart adjustments—optimizing staffing, negotiating better rates on supplies and lab work, reducing facility expenses, and preventing no-shows. Small changes add up, keeping the practice profitable without compromising patient care.

If staffing costs are a concern, Teero makes it easy to adjust your team as needed. Whether you need temporary coverage or a long-term hire, Teero connects you with qualified dental professionals, helping you control labor costs without overstaffing. Give us a call to learn more.