I am often asked by both new and experienced dental practice owners as to what ranges their expenses should fall within. Dentists in the process of creating a business plan for a start-up or in the market to purchase a dental practice also regularly ask this question.
In my consulting business I am in the unique position to be able to see the profit and loss statements of numerous dental clinics around Australia. Further, I currently operate multiple practices and have started or bought 15 dental clinics of various sizes. This, along with talking regularly to dental accountants and financiers, allows me to have a rare insight into what expense targets a dental clinic should aim to achieve.
The main expenses I look to benchmark are rent, wages (not including clinicians) and supplies (not including lab fees) as these are typically the largest and the most comparable across various clinics. The remaining expenses are typically low in relation to total expenses and highly variable across the industry.
Benchmarks for lab fees are largely useless as it provides limited information in regards to profitability. For example, a clinic with a very high lab fee expense is likely going to be more profitable than a clinic with a low lab fee expense as they’re performing more prosthodontic services which typically caries a higher profitability margin.
The benchmarks listed below are for a general dentistry practice performing a range of procedures. Further, these benchmarks are only appropriate to be applied to a surgery billing over $700,000 per year, any lower and the percentages become distorted as business profitability significantly decreases.
Wages (not including clinicians): 17% to 21% of total turnover.
Supplies (not including lab fees): 7% to 8% of total turnover – some can get this as low as 5%
Rent: 5% to 10% of total turnover. This depends a lot of the stage of maturity of the practice.
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Our next l practice ownership seminar is coming up in Sydney on the 2nd and 3rd of March 2019. We cover all these topics and more, the Sydney seminar has sold out in previous years so please register ASAP: