What Are the Costs of Owning a Dental Practice?
Owning a dental practice involves more than the initial cost of purchasing or starting the business. Once a dentist becomes an owner, the practice has ongoing operating expenses that must be managed carefully.
For dentists considering dental practice financing, understanding these recurring costs can help when evaluating the financial performance of an existing practice or planning a new one.
1. Payroll and Employee Costs
Employee compensation can be one of the largest recurring expenses for a dental practice.
Depending on the practice, payroll costs can include dentists, hygienists, dental assistants, reception staff, office managers, and other employees.
Benefits, payroll taxes, and other employee-related expenses should also be considered.
2. Dental Supplies
Dental practices require a continuous supply of clinical materials.
Expenses can include disposable supplies, sterilization products, gloves, masks, instruments, restorative materials, and other items needed for patient care.
Supply costs can vary based on the services and procedure volume of the practice.
3. Laboratory Expenses
Practices that provide crowns, bridges, dentures, implants, aligners, and other services may have laboratory expenses.
These costs can vary depending on the types and volume of procedures performed.
4. Rent or Real Estate Expenses
A practice operating from leased space will generally have ongoing rent and related occupancy expenses.
Dentists who own their building may instead have expenses such as property taxes, insurance, maintenance, utilities, and potentially commercial real estate debt.
5. Equipment Maintenance and Replacement
Dental equipment requires ongoing maintenance and eventually needs to be replaced or upgraded.
Major expenses can include dental chairs, imaging equipment, sterilization systems, computers, scanners, and other technology.
Owners should consider future replacement costs rather than treating equipment as a one-time expense.
6. Insurance
A dental practice may require several types of insurance coverage.
Depending on the business, expenses can include property insurance, general liability coverage, professional coverage, workers’ compensation, and other policies.
The appropriate coverage varies based on the practice and its operations.
7. Technology and Software
Modern dental practices often rely on technology for scheduling, billing, electronic records, imaging, communication, cybersecurity, and other functions.
Software subscriptions and technology expenses can therefore become recurring operating costs.
8. Marketing
Marketing can help a practice attract new patients and maintain visibility within its market.
Potential expenses include website development, search engine optimization, online advertising, social media, direct marketing, and other promotional activities.
9. Utilities and Office Expenses
A dental office also has normal business operating expenses.
These can include electricity, water, internet, telephone service, office supplies, cleaning, waste disposal, and maintenance.
10. Billing and Administrative Expenses
Some practices handle billing internally, while others outsource portions of their revenue-cycle management.
Expenses can include billing services, accounting, bookkeeping, payroll services, legal services, and other professional support.
11. Debt Payments
If the practice has been financed, the owner will need to account for scheduled loan payments.
Debt payments should be considered alongside the practice’s operating expenses when evaluating monthly cash flow.
12. Continuing Education and Professional Development
Dentists and staff may invest in continuing education, certifications, conferences, training, and other professional development.
These expenses can help practices maintain skills and potentially expand the services they offer.
13. Regulatory and Compliance Expenses
Dental practices must operate in accordance with applicable professional, health, safety, employment, and other requirements.
Compliance-related expenses can vary depending on the practice’s location, size, services, and operations.
14. Plan for Variable Expenses
Not every practice expense stays the same each month.
Supply costs, laboratory expenses, equipment repairs, marketing, staffing, and other expenses can fluctuate based on patient volume and business conditions.
Owners should therefore monitor expenses regularly rather than relying only on an annual budget.
15. Cash Flow Management Is Important
Strong revenue does not automatically mean strong cash flow.
A practice may have significant accounts receivable or experience timing differences between when services are provided and when payments are collected.
Monitoring collections, expenses, and available cash can help owners manage the business more effectively.
Final Thought
The costs of owning a dental practice can include payroll, supplies, laboratory expenses, occupancy, equipment, insurance, technology, marketing, administrative services, debt payments, and other operating expenses.
Understanding these costs can help dentists evaluate an existing practice, develop realistic financial projections, and determine how much working capital may be appropriate for the business.
