what are ways to keep overhead costs down? In a high 1.5-2M producing practice, i would imagine there to be lots of lab fees, expensive digital milling equipment and among other things. I know of a recent grad from my dental school making 500k/year on 30 clinical hours. Produces 850k dentistry but very low overhead.
Keeping the overhead costs down... It's a fine line, because cost cutting can sometimes cause decrease in productivity/patient flow.
Before starting/acquiring a practice, rent is one overhead you have some control over. Either you negotiate lower rates or find a cheap location. However, visibility does play some role in attracting NP's, but that can be negated with good advertising.
Next is staffing. A lot of your costs will come from staffing. This is another fine line to manage. You could go with a bunch of minimum wage DA's and new grad RDHs. Pros is you save a lot in staffing and can hire more to compensate for lack of skills. The downside is that you can only compensate so much with more staffing until the whole system becomes inefficient. I approach this by providing incentives (if practice does well, they get paid more). I don't think staffing is a great place to cut, but I think systems need to be in place to motivate all the staff to produce.
Supplies: There are ways to save on materials. However, there are some things that are worth skimping on, and some not. Examples would be bibs, disposable, etc... you can definitely get them from 3rd party non-dental distributors (ebay, net32) for a lot cheaper. Some things I wouldn't skimp on would be things that go in the mouth... bonding agents, composites, disinfectants. You could save money by going grey market on them, but I would only do that on things that don't matter. Redos due to expired/poor quality composites/bonding agents is a PITA.
Support services: These can definitely take a chunk, especially ones with recurring monthly/annual fees. If you need them, shop around. If you can do it yourself or having your staff member, it may be worth looking into to save money (but factor in supplies/materials/labor cost) in comparison to outsourcing. Anything that has the potential for significant downtime should be outsourced to a company that can guarantee minimal downtime. The biggest example is IT. There are things in dentistry that require 100% uptime when utilized, that being electricity/water, vacuum/air, and IT/computers. Losing any of these aspects of your dental office is VERY costly. Your office could lose upwards of 1500-2500+/hour just by losing an hour of production. For electricity, I have a backup generator. For water, I have backup water, for vacuum/air, I have 2 vacuums, 2 compressors (backup, used, ready to be deployed in minutes!), and IT/computers (I have bare metal deployments ready to go at a moment's notice).
Equipment: This is a bit more about overhead v. initial capital costs. Something I learned is that I bought cheap, used or refurbs when I first started - Cheap at first, but ongoing maintenance costs are higher for used equipment. You could go with new, but the capital costs are higher w/ lower ongoing maintenance costs for the first few years. When it comes to equipment, always ask yourself, how is this going to make me more money? Introducing new technology doesn't always makes sense, and overhead can increase as the complexity of your machinery increases as well.
Labs: Another controversial point. Cheap doesn't always mean bad, but it's more likely to be bad work and vice versa, expensive doesn't always mean good either. Some people may say that digital impressions and/or milling machines can save money, but it all depends on your workflow. If you get only a DI, you save on impression/tray material, but you have to factor in initial acquisition cost and recurrent subscription fees + you still have to make a temporary. If you get a mill, you save on shipping, impression/tray/temp materials, but then you have to pay for the acquisition cost, recurrent subscription fees, consumables (pucks, blocks, burs, glaze, lubricant, stains, etc...)
I don't think I'm the best to answer how you can lower your overhead to those levels, because I am at the point of diminishing returns in the pursuit of increased production. I see hope in breaking 4 sometime in the future. I support making more, even if overhead (by absolute numbers, not percentage) goes up, because you're making more money. You can only cut so much, but if your production is low, the percent doesn't matter as much as the takehome. An example is your colleague, if he/she only produces 850k, you can only cut so much and maximum take home can only be 850k (which is unrealistic @ 0% overhead). There are diminishing returns, but I believe the best way to increase income is to focus on increasing production/collections and cut overhead as long as it doesn't affect your productions/collections greatly.
