How do expenses and overhead in your office compare with the averages in the US? You will find the numbers below. Following the numbers we will talk about how to reduce those numbers.
Based on practices with revenues ranging from $350,000 – 1,200,000:
Lab Costs 8.0%
Dental Supplies 8.0%
Lab Costs 8.0%
Office Supplies 3.0%
So just to be clear, these are averages. Don’t get too alarmed if your numbers are a little different. Some practices have costs much lower and some have costs which are higher. The individual categories can vary as well depending on the types of services offered.
The key to reducing overhead is to start with the low hanging fruit – in other words start with the easiest, most productive changes to reduce overhead and progressively work your way to the more difficult areas.
Much has been written on the subject of reducing overhead already so we won’t repeat all the common recommendations. If all of the common recommendations were working so well you probably wouldn’t be reading this, right?
In this article we will focus on just two often overlooked, but easiest and most productive changes a dentist can make.
The first is increasing revenues. Often when people talk about overhead they only focus on expenditures. But overhead equals expenditures divided by revenues. If expenditures remain the same, and you increase revenues, the result is lower overhead.
There are four great ways to increase revenues – get more patients, see more patients, do more procedures, or do more expensive procedures. Often the easiest of these options is the last one – doing more expensive procedures on patients who are already coming to your office. The easiest way to do more expensive procedures is by furthering your continuing education training. For example, if you are not already doing implants then signing up for an implant course may be perfect for you. Or maybe it’s time you brushed up on your endo skills. Have you thought about sleep apnea, occlusal calibration, or TMJ therapy? Could you place more veneers if you had more confidence in doing them? Could you learn to do simple orthodontics?
Dentists who add new skills to their repertoire almost always increase their revenues. Also one of the best aspects of this is that adding new skills gives a return on investment every year thereafter.
Ok, now we are going to tackle the tougher part of the equation – reducing expenses. Actually, this is pretty easy and I’m going to tell you how after I explain why so many dentists fail at this. Dentists fail at reducing expenses because it takes time – usually their time! And it requires uncomfortable conversations they don’t like having with their employees, and vendors.
Here is the simple solution: Join a dental co-op. There are some really good
co-ops out there such as Our Dental Co-op, and let them take their time to have those uncomfortable conversations. A co-op is an association of dentists who come together as a group to negotiate better pricing on dental supplies, offices supplies, lab fees, continuing education, insurance, payroll processing, credit card processing and more.
Everyone knows that large groups get discounts. That’s just the American way. Corporate dental offices have used this strategy for years to reduce their expenses making it hard for the solo practitioner to compete with them.
You can attempt to call your lab and ask for a discount. You can even call them several times and yell and complain, and even threaten, but in the end you are just one office and they probably won’t care enough to reduce their fees for you. But, when a dental co-op like Our Dental Co-op calls a lab on behalf of hundreds of dental offices, the laboratories tend to listen very carefully.
Even if it was possible that you could (and would) personally call and negotiate prices, you would have to make those calls for payroll processing, dental supplies, laboratories, credit card processing ect. The reality is that most dentists are not going to take the time to make these calls. In fact, they shouldn’t make these calls because it takes away from the time they should be in the operatory making revenue. In fact, by making the phone calls personally it could actually make their overhead go up since their savings may not be equal to the lost revenue.
Optionally, you could have your office staff make the calls, but two things here; 1) the lab isn’t going to take a call from your assistant serious enough to reduce your fees, and 2) since it’s just more work for the staff they won’t approach it seriously. After a few calls and rejections they quit calling.
It so much easier and productive to join a dental co-op and and let them use the power that comes with their numbers. Usually the benefits to join far exceed any minimal cost to join.
So just to wrap things up –The two easiest ways to lower overhead is by increasing revenues through continuing education, and by reducing expenditures through the benefits of membership in a dental co-op.