How to Value Staff Costs
Here’s how you should evaluate staff costs in a dental practice purchase.
contact us Work with Us
The largest cost in any dental practice is the money paid to staff. So when you are looking to buy a dental practice, the number one expense to pay attention to is staff costs.
Staff costs include not just salaries, but also payroll taxes and any benefits or perks paid to staff like bonuses, vacation, 401K’s and health insurance (though, that’s becoming increasingly uncommon).
Once you total up all the expenses above, one way to compare one practice to another is to divide the total by that year’s collections to see what percentage of the money coming through the door of the practice is going to staff. For example, a practice collecting $1,000,000 and spending $300,000 on total staff costs is spending 30% on its people.
Below are the actual averages of staff costs for dental practices in the U.S., for the year ending in 2019 (last available data). Data from this set is exclusively from general dental practices.
Median Staff Costs as a Percentage of Collections – 33.1%
However, it’s interesting to note that while that is the median, a closer look a practice size shows that smaller practices tend to do a better job managing that cost.
Presumably (though, this is my speculation), this is because dentists are owner-operators, and larger practices have more time dedicated to dental work and less to managing the business, creating the perceived need to hire more bodies. Complexity increases with practice size as you take on more insurance providers, have more columns to manage on the schedule, and so some additional staff costs can make sense.
Median Staff Costs by Practice size:
- 25.9% – Collections < $500,000
- 29.2% – Collections Between $500,000-$1M
- 33.5% – Collections Between $1M-$2M
- 37.0% – Collections > $2M
Read More:
Average Staff Costs in Dental Practices
Want To Learn More?
Podcast
Listen to this podcast to understand how to quantitatively analyze a practice for sale.
