Production is up. Take‑home isn’t.
You’re seeing more patients than ever. Production numbers are climbing. The schedule is full. And after staff payroll, supplies, lab fees, and overhead, you’re netting 12–15 cents on every dollar instead of 30. That’s not a sales problem. It’s the same financial pattern I see in every practice that scales without an operating system underneath it — production that doesn’t collect, chair time that doesn’t bill, and an entity setup that hasn’t been revisited since the practice opened.
For US‑based dental, chiropractic, veterinary, and specialty medical practice owners doing $1M–$20M in revenue.
per practice
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Most healthcare CPAs measure overhead percentage. I run a different framework. Here’s why it matters.
If you’ve talked to a dental, chiropractic, or veterinary CPA before, you’ve heard the conversation framed in overhead percentage: “Healthy practices run 55–65% overhead. Above 70% is a problem.” It’s a useful number but it lumps every cost into one bucket and gives you no diagnostic on which cost is actually leaking. I run 60/15/15 instead: 60% gross margin, 15% sales & marketing, 15% general & administrative. That leaves 30% operating margin — the same number high‑performing practices hit, but with three diagnostic levers instead of one bucket.
Industry typically lands at 50–55% once clinical staff comp is properly classified as delivery cost. That misclassification is where the first leak hides.
Most practices spend 2–7% on marketing — that part is usually fine. The leak rarely lives here.
Industry sits at 20–30%. This is where most of the gap lives — uncategorized vendor spend, overstaffed admin, and facility cost that grew past where it should have.
Industry average is 12.9%. The destination is the same as the dental CPA benchmarks you’ve seen — Overjet, ZenOne, PorterKinney. The language is different. Top quartile practices hit it. Most don’t.
Average practice net margin after owner salary is 13%. Top quartile is 30%+. That gap isn’t talent.
A $1.5M practice at 13% net margin keeps $195K for the owner after comp. The same practice at 30% net margin keeps $450K. Same chairs. Same patients. Same staff. $255K difference, every year. Three structural problems compound — and almost nobody fixes them in the right order.
You produce $50K and collect $42K
Insurance write‑downs, patient payment plans, and aging A/R quietly eat 15–25% of production before it ever hits the bank.
50–65% when target is 75–85%
Every empty hour in an operatory is fixed‑cost burn against zero revenue. Most practices never benchmark this weekly.
Bottom 15–20% run at negative margin
PPO contracts negotiated five years ago at rates that no longer cover delivery cost — and most practices keep them because cancellation feels risky.
The framework that closes the gap has three steps in a fixed order: COGS first, S&M second, G&A third. Never reordered. For healthcare practices, the leak lives in COGS plus the production‑collection gap.
The leak isn’t hypothetical. It’s measurable.
Healthcare profitability runs through four numbers.
In healthcare, COGS plus collections is where you bleed first — and it’s where you fix it first. 60% gross margin, 15% sales & marketing, 15% G&A. That leaves 25–30% net margin after owner comp — the same destination as overhead‑based benchmarks, but with three diagnostic levers instead of one bucket.
In healthcare, COGS plus collections is where you bleed first. And it’s where you fix it first.
Most practice owners think their cost problem is overhead — too much rent, too many staff, too much supply spend. It usually isn’t. It’s the gap between production and collected revenue, plus clinical staff cost outpacing collections growth. The healthy gross margin for a practice at $1M–$20M is 60%. Most practices I look at are running 45–55%. The 5–15 point gap shows up in three places.
Production that never converts to collections
Industry average: practices collect about 84% of what they produce. The 16% gap is write‑downs, write‑offs, and aging A/R — work that was performed and never paid for. On a $1.5M production practice, that’s $240K of revenue earned and never collected. The fix is three operational changes: insurance verification before treatment, same‑day collection of patient portion, and 30‑day A/R review. Practices that operationalize this typically lift collection rate from 84% to 92%+ in the first quarter — 6–8 points of net margin without touching pricing or volume.
Chair and operatory utilization nobody benchmarks weekly
Top‑performing practices hit 75–85% chair utilization during operating hours. Most sit at 50–65% because of no‑shows (industry average 18–22%), schedule gaps, and time blocks that don’t match procedure mix. On a 5‑operatory practice, the gap from 60% to 80% utilization is roughly $200K–$400K of additional production capacity per year — without adding staff or extending hours. The benchmark to track weekly: production per operatory per day. Target is $2,500–$3,500 for general dentistry, $4,000+ for specialty.
Insurance contracts that haven’t been re‑priced in 5+ years
Most practices have 15–25% of insurance contracts running at negative or marginal contribution margin. PPO reimbursement rates that were acceptable in 2019 don’t cover today’s delivery cost. The number you need is profitability per insurance contract: average reimbursement per procedure code minus your fully‑loaded cost per procedure. Once you see contract‑level margin, the action is obvious — renegotiate the bottom contracts, drop the worst, and shift freed capacity toward private pay or higher‑reimbursing PPO contracts.
The COGS plus collections leak is rarely just one of these three. It’s all three, compounding. That’s why net margin sits at 13% instead of 30.
Most practice owners are running three jobs at once.
If you took 90 days off — no calls, no emails, no decisions — what happens? In most practices I look at, three things break: clinical workflow stalls because you’re the senior provider doing the complex cases. New patient case acceptance drops because you’re the lead case‑presenter. Staff and operations grind because you’re the final decision‑maker on hiring, scheduling, and vendor calls.
That’s not a practice. It’s a job with employees. Practices like this sell at 1–2x EBITDA — buying a job. Practices that run independently with documented clinical protocols, delegated case presentation, and a manager who handles operations sell at 3–5x to other practitioners and 5–7x to DSOs/PE rollups. Same earnings, different multiple. On a practice doing $400K in EBITDA, that’s the difference between a $600K sale and a $2M+ exit.
The fix is what I call “firing yourself” — building the practice so it doesn’t need you in three places at once: senior clinician, case‑presenter, and operations manager. It’s an 18–24 month process and it’s the single biggest enterprise value lever any practice has. For healthcare specifically, it’s also what makes succession actually possible — most practices that go to market don’t sell because the buyer pool won’t pay for a business that requires the seller to keep working.
This is also why “we just need more new patients” is the wrong answer. Bigger numbers in a more dependent practice don’t move the multiple. They make the burnout worse and the sale harder.
Want to see where your practice sits against 60/15/15?
Book the Leak Check. I’ll work through your rough numbers — production, collections, chair utilization, payer mix, owner comp — and show you the top 3–5 leaks with dollar ranges. No documents, no prep. You keep the Leak Map either way. 15 spots per month.
What this looks like in real practices.
“From operator to owner‑investor — exit capital funded chiropractic franchise acquisitions.”
“94% revenue growth, 401% profit increase, and an $87,966 tax liability converted to a refund.”
“Completed documented entity and tax-planning work as part of a broader exit-readiness engagement.”
Choose the operating model closest to yours.
Most practice owners are running three jobs at once.
Same EBITDA. Completely different exit. The multiple a buyer assigns isn’t arbitrary — it’s a risk assessment. Owner‑dependent practices sell for one number. Practices that run without the founder sell for another.
Same earnings. Different exit.
A practice doing $400K in EBITDA that depends on the owner‑doctor sells at 1–2x. The same earnings inside a practice with documented clinical protocols, delegated case presentation, and a manager who handles operations sells at 5–7x to DSOs and PE rollups. The fix is what I call “firing yourself” — an 18–24 month process and the single biggest enterprise value lever any practice has.
Find out where your practice’s margin is leaking.
Most healthcare practices in the $1M–$20M band have $50K–$300K of profit and tax leaks hiding in collections, chair utilization, insurance contract pricing, equipment depreciation, and entity setup. The Leak Check finds them. We work through your rough numbers and produce a 1‑page Leak Map: top 3–5 leaks with dollar ranges, ranked by 12‑month impact. 15 spots per month.
For US‑based dental, chiropractic, veterinary, and specialty medical practice owners doing $1M–$20M in revenue.
Questions about Fractional CFO for Healthcare Practices.
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