62% overhead is average. 55% changes the economics.

A practice running at 62% overhead may look perfectly healthy on paper. Bills paid, payroll covered, production happening, owner taking home a reasonable income.

Compare it with a practice operating closer to 55% and the difference stops being cosmetic. On $2 million in collections, seven points is roughly $140,000 a year. At $3 million it is about $210,000. The percentage looks small. The dollars are not.

What higher overhead quietly costs

The issue is rarely that one expense is too high. It is that higher overhead leaves less of every dollar available to the owner and to the future of the practice.

That remaining margin funds retirement contributions, cash reserves, debt reduction, equipment, technology, an additional team member, a second location, or simply flexibility. When overhead stays elevated year after year, the opportunity cost compounds quietly.

Overhead here excludes owner compensation. Ranges shift with specialty, market, and payer mix, so treat these as a starting point for a conversation rather than a verdict.

The question is not whether the practice should spend less for the sake of a lower percentage. It is what the practice could do with the additional margin if it were available.

Average does not mean optimal

This distinction matters. A benchmark tells you where you sit relative to other practices. Sitting close to average does not mean your economics are where they should be.

If you are at 62%, that alone does not mean something is wrong. You may be investing in growth, carrying extra staff ahead of an expansion, or running a cost structure that fits your specialty and market. But if you have been at 62% for years without a clear reason, it is worth knowing what is holding you there.

Usually it is not one obvious expense. Labor drifts slightly inefficient, schedules carry unused capacity, supply costs creep upward, administrative expense grows without review, collections fall behind production. None of it looks dramatic alone. Together it moves the bottom line by six figures.

The goal is not the lowest overhead

Cutting overhead blindly creates its own problems. Trimming staff, supplies, or technology without understanding what they contribute can reduce cost while reducing production, capacity, or the patient experience by more.

The better objective is productive overhead. Every significant expense should have a purpose, and you should be able to say whether the value it creates justifies what it costs. A practice can spend more in one category and still be more profitable, if that spending generates enough additional production or efficiency to pay for itself.

So I would not treat 55% as a finish line. I would treat it as a reference point that raises the more useful question: what is the distance between your current overhead and a stronger operating model actually worth in dollars?

Look at the seven points

For a $2 million practice, seven points is roughly $140,000 a year. That deserves attention even if 55% is not the right target for you specifically.

The opportunity is not necessarily to cut $140,000 of expense. It may be to improve scheduling, strengthen collections, restructure labor, negotiate purchasing, eliminate costs nobody has reviewed, or make better use of capacity the practice already has and already pays for.

The P&L gives you the percentage. The work is understanding what sits underneath it. A 62% overhead rate may be average. That does not mean you have to settle for it.

Frequently asked questions

Austin Moffat

Founder of DSO CFO, a dental-specialized CFO firm serving practices and DSOs nationwide. Cash flow and profit work, taught in plain language.