Your Overhead Is Probably 62%. Here's Exactly What That Means.

Thirteen points of overhead on a million-dollar practice is $130,000 a year. That's not a rounding error on a P&L, it's the entire difference between a practice that can afford a second doctor and one that can't afford a second hygiene chair.

Here's the claim an informed owner can genuinely fight us on: the 62% number everyone quotes isn't a benchmark you're probably hitting. It's the best-case cost structure of a well-run practice, measured against production, with several real expenses parked below the line. The honest median is closer to 75%. Your accountant hands you a 60-something percent figure every January, and we think that figure is usually wrong in one specific, predictable direction. Industry-wide overhead averages roughly 62% of production with a recommended target of 59%, according to the ADA's own guidance. The word doing all the work in that sentence is "production."

Thirteen Points Is Twenty-Nine Working Days

Percentages anesthetize people. Days don't. Call it 220 clinical days a year. At 62% overhead, you work roughly 136 of those days to cover other people's invoices before a dollar of the year's profit is yours. At 75%, it's 165 days. The thirteen-point gap between the benchmark you quote and the number most practices actually run is 29 working days.

Overhead isn't a percentage. It's the number of days a year you work for everyone else before you start working for yourself.

62% Is the Ceiling of the Recommended Structure, Not the Middle

Read the ADA's cost framework closely and something falls out of it. Variable costs, meaning payroll, lab fees and supplies, should run 45% to 55% of production, and fixed costs 4% to 7%, per that same ADA guidance. Add the ranges and you get 49% to 62%.

So the "average" of 62% isn't the comfortable middle of a healthy practice. It's the top edge of the recommended structure, the version where every variable line is at its worst allowable number and every fixed line is too. Owners treat 62% as par. On the arithmetic of the framework itself, 62% is already the bogey. That's before anything that doesn't fit neatly into those two buckets, which in most practices is a lot.

How 62% Becomes 76% Without a Single New Expense

Take a practice sized like the middle of the market. In the Practice Market Index, our dataset of 1,043 dental practices currently listed for sale, median collections are $1,000,000 (n=858) and the median practice has 5 operatories (n=855). Those are listings, the asking side of the market, not a portrait of all practices, but they tell you what a mid-market general practice looks like in rooms and revenue.

So: a practice that produces $1,100,000 and collects $1,000,000. Its accountant reports 62% overhead, which means $682,000 of operating expense against production. Against what actually hit the bank, that same $682,000 is 68.2%. Nothing changed except the denominator, and six points of overhead appeared.

Now add the lines that routinely sit below the operating-expense section: $45,000 of principal on the equipment and leasehold notes, a $20,000 employer retirement match, and $15,000 of owner auto, CE and disability premiums. That's $80,000 of real cash leaving the practice every year. Total cash cost becomes $762,000 or 76.2% of collections.

Same practice. Same month. Same bookkeeper. 62% or 76% depending entirely on which denominator and which lines you accept. Our view: if a number can move fourteen points on definitions alone, it is not a management metric, it's a conversation starter.

Levin's Own Median Is 74.62%

This isn't a theoretical complaint. The Levin Group Data Center combined ADA and BLS data and found that while the recommended overhead target for a general practice is 59%, the actual median overhead across the practices analyzed was 74.62%, and 75% for general practices specifically, as reported in Dental Economics. The same firm that publishes the 59% target measured reality at 75%.

A sixteen-point gap between a benchmark and a median isn't a performance gap. It's a measurement gap wearing a performance gap's clothes. Some of it is genuine inefficiency. A large chunk of it is that the target and the median are not counting the same things.

What Most Owners Get Wrong: Comparing a Ratio They Never Defined

The mistake has a specific profile. It's the owner three to eight years in, with a clean accountant-prepared P&L, who hears a number at a study club or a CE weekend and benchmarks against it without ever asking what's in it. They walk out either relieved or ashamed, and both reactions are unearned.

Four questions settle it, and almost nobody asks all four:

• Production or collections in the denominator? Six points swing on that alone in the example above.
• Is doctor compensation in or out? An owner who pays themselves a $180,000 W-2 salary and includes it will report overhead 18 points higher than an identical practice that takes distributions.
• Is debt service in or out? Principal isn't an expense on an income statement, but it's cash out the door and it constrains you exactly like rent does.
• Are owner-benefit items in or out? Retirement match, auto, family phone plans, the spouse on payroll.

Until those four are pinned down, comparing your overhead to anybody's average is comparing your weight to someone else's height. We'd stop quoting a single overhead percentage entirely and start quoting two: total cash out as a percentage of collections, and the same figure before owner compensation. The first tells you whether the business is solvent. The second tells you whether it's worth owning.

The Payroll Line Gets You to 54% Before the Lights Come On

Here's why 75% stops looking like incompetence once you build it from the wage data up. The median dental hygienist earns $87,530 a year and the median dental assistant $46,540, per BLS May 2023 wage data for hygienists and the corresponding data for assistants. Those are national medians across 211,630 hygienists and 370,690 assistants, so they're not an outlier market.

Staff that $1,000,000 practice conservatively. Two hygienists at the median is $175,060. Two assistants is $93,080. Add two administrative roles at $45,000 each and base wages reach $358,140. Apply an 18% load for payroll taxes, workers' comp and whatever health contribution you make, and the payroll line is $422,605, or 42.3% of collections before the doctor takes anything.

Now add lab and supplies at a disciplined 12% of collections, which is $120,000. You're at $542,605, roughly 54%, and you haven't yet paid rent, software, merchant fees, malpractice, marketing, utilities, the equipment note or yourself. Occupancy, technology and debt service will take you into the high sixties without anyone doing anything stupid.

That's the real finding. The practices sitting at 75% mostly aren't being robbed by a supply rep. They're carrying a wage structure that moved and a fee structure that didn't.

Hygiene Wage Pressure Is Erosion, Not Drift

This is where Drift vs. Erosion earns its keep. Drift is small, steady and recoverable: you manage it operationally. Erosion is structural and compounding: it requires renegotiation, repricing or exit. Supply cost creep of 2% a year is drift. You fix it with a formulary, two vendors and a quarterly review.

Hygiene wages are not drift. A regional wage floor that moved 25% and never moved back is erosion, and you cannot schedule your way out of it. One hygienist at the BLS median costs $103,285 fully loaded at an 18% burden. Across 220 clinical days, that's $469 a day in wage cost before you've paid for the room they stand in. If your hygiene department is producing $900 a day per hygienist, it isn't a profit center, it's a referral service you're subsidizing at roughly 48 cents on the dollar of its own cost.

Our call: a hygiene department that can't clear two and a half times its own loaded wage is an erosion problem, and the only honest responses are raising hygiene fees, restructuring the day to add covered perio and adjunct services, or dropping the plans that make the arithmetic impossible. Cutting supplies won't touch it. Neither will a schedule template. The owners who lose the most money are the ones who spend three years treating a structural reimbursement and wage squeeze as a coaching issue.

The Dark Fifth Operatory

Fixed overhead is where the percentage framing hides the most money. Say rent, software, insurance, merchant fees and the equipment note total $180,000 across five operatories. That's $36,000 per room per year or $164 per room per clinical day. You pay that whether the room is running or dark.

Median collections per operatory among practices listed for sale is $200,000 (n=733) in the Practice Market Index, with the middle half between $147,000 and $266,667. Again, that's the asking side of the market, not all practices. But it frames the question properly: a room you've built, equipped and insured that produces nothing isn't costing you $164 a day, it's costing you $164 a day plus the capacity a comparably equipped room generates elsewhere. That's the math that makes an associate or a second hygiene day pencil out when a percentage-based conversation says you can't afford either.

Overhead percentage and overhead dollars point in opposite directions here, and that's exactly the trap. Add a hygienist and your overhead percentage goes up on day one. Add a hygienist who produces three times their loaded wage and your profit dollars go up every year after. Our view: the percentage is the wrong metric for growth decisions. Dollars per room per day is the right one.

What Would Change Our Mind

If someone publishes a median overhead figure built on collections, with doctor compensation and debt service stated explicitly, and it lands near 62%, we'll revise this hard. We haven't seen it. What we're tracking next is the gap between the two numbers an owner can actually control: collections per operatory and fully loaded payroll per operatory. If wage floors keep rising while fee schedules stay frozen, the 75% median won't hold either, and the practices still quoting 62% in 2028 will be the ones that already sold.

Three Lines to Pull This Week

Rebuild one year of overhead on collections, not production, and add back principal, retirement match and owner-benefit items so you're looking at total cash out. Then split it into fixed cost per operatory per day and variable cost as a percentage of collections, because those two numbers get fixed by completely different actions. Finally, run your hygiene department alone: loaded wage versus its own production, by provider. If any hygienist clears less than two and a half times their loaded cost, that's an erosion problem to put on this quarter's agenda, not next year's.

If you want a clean read on where your own number actually sits once production, doctor comp and debt service are handled consistently, our overhead benchmark tool is free: run your own numbers and see how your total cash overhead per operatory compares to the practices currently on the market. Every submission sharpens the benchmark we publish back to you.