As a practice owner, you know the harsh reality behind the numbers: when a patient pays $1,500 for a crown, it isn’t pure profit. Unfortunately, your team members and outsiders often see that gross production number and assume you are raking it in. If you want your staff to care about waste, efficiency, and hitting daily goals, you have to pull back the curtain and teach them how a dental business actually survives.
As Jennifer Paxton pointed out in a recent Toolbox Tuesday podcast episode, dental practices operate on incredibly tight margins. In fact, the average dental office runs on an overhead of 70% or more, leaving a profit margin of 30% or less to cover taxes, reinvestment, rainy-day savings, and the owner’s income.
To get your team to row in the same direction, you need to help them understand these numbers. The easiest way to start that conversation is by breaking down the two types of business expenses: Fixed Overhead and Variable Overhead. Here is how you can explain it to them simply and effectively:
What is Fixed Overhead
Think of fixed overhead as the baseline cost of existence for your practice. These are the expenses that arrive every month, regardless of how many patients sit in your chairs or how much revenue you bring in. Whether you see 100 patients a week or have to close for a week due to a staff flu outbreak, these bills do not change.
Common examples of fixed overhead include:
- Mortgages or building lease payments
- Practice acquisition or equipment loans
- Malpractice and business insurance
- Software subscriptions (like your PMS)
Because these numbers are set in stone, they form your Bare Minimum (BAM) target, the baseline revenue the practice must generate just to survive.
What is Variable Overhead?
Variable overhead includes the expenses that fluctuate based on your practice’s volume and choices. Simply put: the more dentistry you do, the more these costs will generally move. However, these are also the numbers where the dental team has the most influence and control.
Common examples of variable overhead include:
- Dental Supplies & PPE: Gloves, masks, composites, and impression materials. As we’ve all experienced, sudden supply chain shortages or fuel spikes can cause the price of a box of gloves to grow 150%. Yet, you can’t charge a patient more for their crown just because gloves got expensive that week.
- Lab Bills: The cost of sending crowns, bridges, and appliances to dental labs (which can often be negotiated or optimized).
- Hourly Payroll & Bonus Incentives: While baseline salaries feel fixed, overtime and staffing adjustments shift this number.
Because variable expenses are fluid, tracking them closely allows a practice to see where money might be leaking and where smart adjustments can be made.
Fixed vs. Variable Overhead at a Glance
|
Expense Type |
Definition |
Key Dental Examples |
Team Control |
|
Fixed Overhead |
Costs that stay the same regardless of patient volume. |
Mortgages, practice loans, insurance. |
Low (Set by contracts) |
|
Variable Overhead |
Costs that fluctuate based on production and market changes. |
Clinical supplies, lab fees, PPE. |
High (Ordering habits, waste reduction) |
Why Every Team Member Has a Vested Interest
Finances can feel like an uncomfortable topic, but understanding them isn’t just the owner-doctor’s job. When a practice doesn’t hit its baseline goals, the owner has to dip into personal savings to cover payroll. That is a short-term fix, not a long-term strategy.
When the entire team understands the daily overhead goals, everyone can row in the same direction. Many successful practices use this data to set Stretch Goals, meaning that when the team manages variable costs effectively and exceeds production targets, everyone shares in the rewards through profit-sharing.
Take Control of Your Numbers with Pivot Dental Solutions
Building a growing, sustainable dental practice requires looking past the daily schedule and deeply understanding the real costs of doing business. If you don’t know your exact overhead percentage, your daily BAM number, or how to structure goals that motivate your team, you are steering your business in the dark.
That is where Pivot Dental Solutions comes in. We are a specialized consulting business dedicated to helping small, doctor-owned dental practices move from surviving to thriving. We break down the financial noise into actionable, stress-free strategies that empower both owners and their teams to protect their margins and boost their income.
Ready to uncover the real costs holding your practice back?
Let’s chat. Click here to schedule a complimentary 15-minute Discovery Call with Pivot Dental Solutions. We will help you pull back the curtain on your business costs and show you exactly how optimizing your overhead can transform your take-home income.
