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You’re usually not benefitting as much financially by purchasing the facility as you think you are. Most lease versus buy analysis come out pretty close. That being said, you are buying control over your space AND you’re buying a forced savings plan in real estate investment. Read on for more details.

Facility costs should account for 5-10% of practice collections, whether you’re renting the facility or purchasing it. This expense is very geographically specific so there is no exact benchmark price you should pay for a facility. But 5-10% is a good range to start with.

When you’re looking at offices that you’ll potentially buy, let the supply costs be your canary in the coal mine. How they manage their supplies and labs may be an indication as to how well, or poorly, the office is managed in general.

Staff costs should be 28-30% of practice collections (or lower if you can find it!) This includes staff salaries, payroll taxes and any employee benefits.

Staff costs are the largest expense in most dental practices. Why?

A: Overhead determines profitability and profitability determines value. (See the video for reason #2.) In conjunction with office collections, overhead is the most important value in practice management.

The relationship between overhead and collections can be like a healthy marriage; they both have to be stable and complimentary to make the marriage (or practice) work.