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What is the average revenue for a dental practice?

When you own a dental office, your salary appears like a no-brainer. Pay your staff, pay your taxes, pay your bills, and what is left goes into your pocket. If only it were that easy.

It turns out there is much more that goes into determining a dental practice owner’s salary than most people realize. For instance, if you are incorporated, you must consider how much to set aside as a W-2 wage. Bear in mind; you also have to maintain a steady cash flow to run the daily office operations.

Again, think of factors such as increased competition from large practice organizations, huge student loans, increased cost of doing business, and decreasing insurance reimbursements. Not forgetting regulatory policies have become more stringent nowadays, and compliance does not come cheap. What about the current financial implications brought about by COVID-19 pandemic? Let’s say, for practice owners, seeing that dough in their pocket doesn’t come easy!

Actually, the famous movie quote from Jerry Maguire, “show me the money!” captures the sentiment of many dental office owners. However, keep reading to know how much they make and a few distractors that eat into their take-home profit.  

Owners’ average gross billings

An American Dental Association report (2018) listed the average gross billings per private practice owner as follows:

  • $1,016,080 gross billings per owner (specialist dentist)
  • 717,350 gross billings per owner (general practice dentist)

The average net income for the above categories is:

  • $330,180 average net income for owner (specialist dentist).
  • $190,440 average net income for owner (general practice dentist).

As a form of business, the revenue from a private dental office can vary significantly.  Meaning, if you own an office as a specialist or general dentist, you could probably earn more than the above mentioned average net incomes. Equally, you may earn less than that as a result of the distractors we have already mentioned above.  

Dental practices’ biggest challenge: Overhead costs

Make no mistake; dentistry is an exceptional and rewarding career. Unsurprisingly, it was even ranked as one of the best paying jobs in 2019 by the U.S. World & News Report. But we have to differentiate between associate dentists and practice owners, as well as the salaries that are associated with the two positions.

A large majority of dental offices these days are either battling revenue losses or are in a state of financial stagnation. Dealing with the ever-rising costs is one of the biggest reasons why many dentists are foregoing the option of running their own offices and choosing to go for salaried positions with multi-specialty practices or corporate healthcare groups.  

Much like other business ventures, dental practice owners need to revise their financial structure accordingly. Rent, utilities, new equipment, technology, dental supplies, lab expenses, and staff compensation account for almost two-thirds of total overheads. Meaning, dental practice owners are spending around 75% of their revenues on overheads, leaving only about 25% profit margin. To interpret this further, the average dental office is losing over $600,000 annually to overhead costs! Thus, if not managed well, these costs can leave a huge dent on profit margins.  

Who makes more, a dentist or a doctor?

Determining if you have huge operating costs 

Your accountant should be in a position to provide you with a detailed list of your expenses. Figure out which of these expenses can be minimized. Can you reduce your energy cost? You can opt for eco-friendly lights? What about the rent? What can be done about it?

Identifying what is costing your dental office is the initial step towards cutting your overheads. Approximate in percentage, how much you spend on each item. By doing this, you will see better which of these costs are drying up your coffers.  

Reducing overhead and increasing your revenue 

In a perfect environment, all you have to do to increase your earnings is to attract more patients. Generally, the more patients visit your practice, the more money you will make. However, we don’t reside in a perfect world. You have competitors everywhere.

The most practical option, therefore, is to cut on your expenses. They say; a dollar saved in expenses is a dollar earned. Keeping that in mind, see how you can handle the following key expense categories:

How much does a dental hygienist make? 

Occupancy

Is the rent you are paying reasonable? With demographics and communities ever-changing, it might be wise to only commit to a short lease of only five years or less — and negotiate for better rates from time to time. Once a lease ends, determine if the location or neighborhood your office is located is still attractive.  

Supplies

If you scrutinize your books of account, you will likely discover that the overhead beast hangs around your supply room. Are you still using bite blocks for X-rays? Items that can be reused (after sterilization) might be a more cost-effective option. Also, take a keen look at your procedures for buying supplies. Should you capitalize on discounted bulk orders? Do you have excess inventory, particularly for occasional use items? An assessment of your purchasing model can unveil some cost-savings opportunities.

Reduce staffing costs by embracing on-demand technology

Nothing drains overhead like staffing-related costs. During peak seasons, dental practices get much busier, and it can be quite hard to predict the number of patients who might seek dental care.  Digital staffing platforms, like Cloud Dentistry, allow you to hire peer-reviewed and experienced dental staff instantly and on-demand. In short, you can adjust to the varying needs of your office at a moment’s notice.  That way, you don’t lose money by being under or overstaffed. 

Review your insurance coverage

Many dental practice owners purchase insurance cover once and forget about it. Always ensure your insurance policy changes along with your practice’s needs. Set a yearly appointment to review your coverage. Check out other offers from at least 2-3 insurance companies. You will not only save on premiums but also avoid losses that could happen from being under insured.  

Final thoughts

As you have probably realized, correctly guessing the average revenue dental practices make or how much money owners take home can be quite tricky. But the bottom line is that dental office owners who cut their overhead increase their take-home profit. Try to make yours (overhead) 55% and see the difference! 

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