That’s not a question you might have at the front of your mind. For good reason. You’re probably thinking about quality patient care, getting more patients into the office, dental assistant turnover, etc. After you think about all that, then and only then do you ask, “Am I even profitable?”
However, profitability must be a top priority if you want to expand your services, open a new location, or simply ensure long-term sustainability.
Profitability is the deciding factor in whether you can grow your practice. Unlike a simple “more revenue equals more profit” mindset, true profitability in a dental practice depends on collections versus production, dental practice expenses, operating costs, and growth costs.
Let’s dig in.
At a high level, profitability means making more money than you spend. Simple, right? Yes and no. There are different levels of profitability, and knowing where you stand is critical for making informed decisions. A big part of this comes down to how your month-to-month revenue cycle unfolds:
You might see a month of high collections (due to payments arriving from previously completed procedures), followed by a month of heavy production but fewer collections. This back-and-forth can create a “see-saw” pattern in your net margins. Tracking these cycles closely is essential for maintaining stable cash flow and avoiding major commitments based on a single spike in revenue. Because if you did that, it could mean bad news bears. When managing your finances as a business, you want to ensure that revenue is sustainable, not just a random one-off.
Below is a breakdown of how collections compare to production—and how that shapes profitability:
If collections are lower than production, you may be running at a loss or hovering close to it. Net margins often drop below 5%. Before taking on expansions, identify core issues—such as low case acceptance, out-of-date fee schedules, or inconsistent revenue cycle management—to get back on track.
When collections match production, you generally net below 10%. You cover the basics but have minimal flexibility for unexpected costs.
Greg Essenmacher, founder and CEO of GnA Consulting, notes, “Determining the break-even point is a critical first step in analyzing the dental practice's financials and identifying areas for improvement. It provides the baseline to then assess profitability margins.”
If your collections slightly exceed production, you’re likely netting in the 10-15% range. This setup allows for measured growth—like adding a new service line or part-time staff—without straining finances. Many practices operate successfully here, balancing overhead and revenue effectively.
If your collections significantly outpace production (netting 30% or more), you have the freedom to invest in new tech, increase pay, or even acquire another practice without risking stability. Achieving this tier typically requires disciplined revenue cycle management, streamlined operations, and ongoing expense monitoring.
Understanding exactly where you stand in profitability determines if you can safely add treatments that come with higher upfront costs such as full arch procedures or extensive cosmetic work. If your margins are tight, taking on more expensive cases can add financial strain. By knowing your true profitability level, you’ll have clarity on when (and how) to expand your services.
Tracking how collections align with production is crucial, but it’s only half of the story. You also need a clear view of the expenses that go into delivering patient care. These typically include:
In total, aim to keep these at roughly 40–50% of production. If they climb higher, look for ways to negotiate with vendors, adjust compensation arrangements, or better manage supply inventory.
Even when clinical costs are under control, other operating expenses can quietly eat away at your profit margin:
Practices sometimes hire additional staff or lease larger spaces prematurely, leading to overhead “bloat.” Each significant operating cost should link back to measurable productivity or collections gains.
Growth-related spending—marketing, more office space, advanced equipment—should be evaluated for its potential return:
You might be attracting enough leads, but if your practice struggles with case presentation or scheduling, your marketing ROI will appear weaker than it actually is.
Whether you’re just above break-even or already in the sustainable zone, you can look into the following expenses to take the following steps to improve margins:
As a practice owner, you balance providing great patient care with maintaining a healthy bottom line. If you want to improve profitability in the near term, it helps to pinpoint exactly where your revenue and expenses stand. Start by targeting supply costs. Aim for supplies to be 7–10% of production, ideally less, and use data-driven tools like Method to track spending in real time.
It’s also crucial to monitor key performance indicators (KPIs) so you can stay on top of the broader financial picture. Five KPIs worth keeping front and center are:
By focusing on these metrics, along with understanding your collections-versus-production balance, overseeing clinical and operating costs, and watching for the see-saw effect in monthly revenue, you can shift from unprofitable or break-even to truly sustainable or highly profitable. With that foundation, you’ll be ready to expand services, invest in new opportunities, and ensure your dental practice remains a thriving, successful enterprise. It’s your practice, it’s your money. Manage it well and it will take care of you.
