We have weekly conversations with dentists who tell us they are satisfied because their collections are flat even though they are taking more time off as they approach retirement. On the surface, this feels like a success: production is steady, collections haven’t dropped, and patients are still being seen. But what we’re seeing beneath the surface tells a very different story.
The truth is that flat or slightly improved collections can mask shrinking margins. Leases climb every year. Staff salaries and benefits have risen sharply. Supplies and lab costs have escalated. Insurance reimbursements are not keeping pace. In short, if collections are flat or even modestly up, most practices are quietly sliding backward in terms of profitability and that has direct implications for practice health, value, and long-term sustainability. Below is an illustration to help put this into perspective.
The Hidden Cost of ‘Stable’ Collections: A Three-Year Analysis
| Category | 2024 (Actual) | 2025 (Projected with Increase in Expenses) | 2026 (Projected with Increase in Expenses and Decrease in Collections) |
| Collections | $1,000,000 | $1,000,000 | $970,000 |
| Lease / Rent | $50,000 | $51,500 (+3%) | $53,045 (+3%) |
| Payroll (Staff wages) | $250,000 | $270,000 (+8%) | $291,600 (+8%) |
| Payroll Taxes & Benefits | $30,000 | $32,400 (+8%) | $34,992 (+8%) |
| Dental Supplies | $60,000 | $61,800 (+3%) | $63,654 (+3%) |
| Lab Fees | $70,000 | $72,100 (+3%) | $74,263 (+3%) |
| Professional Fees | $20,000 | $21,000 (+5%) | $22,050 (+5%) |
| Malpractice Insurance | $4,000 | $4,200 (+5%) | $4,410 (+5%) |
| Workers’ Comp Insurance | $3,000 | $3,210 (+7%) | $3,435 (+7%) |
| Office Supplies | $15,000 | $15,750 (+5%) | $16,538 (+5%) |
| Telephone & Internet | $10,000 | $10,500 (+5%) | $11,025 (+5%) |
| Waste Removal | $2,000 | $2,100 (+5%) | $2,205 (+5%) |
| Utilities | $15,000 | $15,750 (+5%) | $16,538 (+5%) |
| Total Expenses | $529,000 | $560,310 | $593,755 |
| Net Profit | $471,000 | $439,690 | $376,245 |
| Net Margin | 47% | 44% | 39% |
| VALUE – 2X NET PROFIT | $942,000 | $879,380 | $752,490 |
What This Analysis Reveals About Practice Value
If your practice holds consistent with collections it is likely that your profitability will not over time. More than likely, your expenses are never going to decrease. The power of compounding interest can be a blessing or a curse and, in this case, it is a negative where expenses can get out of hand quickly if not managed. Using the data above, a seller would have gotten an extra $189,510 for their practice if they sold in 2024 compared to 2026 even though collections only dropped $30,000 for one year.
Industry Data Supporting These Trends
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Staffing Pressures: According to the American Dental Association’s Health Policy Institute (HPI), staffing remains the number one operational challenge for practices. In late 2024, 62% of dentists reported staff recruitment and retention as their biggest issue, and average wages rose between 6–10% year-over-year.
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Supplies and Labs: A Becker’s Dental Review survey in 2024 reported that over 85% of practices saw supply costs increase by at least 5%, and more than a quarter saw increases of over 10%. Similarly, nearly 80% of practices reported higher lab fees.
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Overhead Increases: Focus Partners’ 2023–2024 data showed 95% of practices experienced higher supply costs and 82% saw lab fee increases during the same period.
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Profitability Benchmarks: Blue & Co.’s 2025 Dental Benchmarking Report found that while average practices saw margins squeezed to 20–25%, top-performing practices maintained margins as high as 39%, thanks to strategic fee schedule adjustments and aggressive overhead management.
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Insurance Reimbursements: ADA HPI research has repeatedly shown that insurance reimbursement rates are growing much more slowly than inflation, creating a structural profitability gap unless practices negotiate higher fees or shift payer mix.
Strategic Actions to Protect Practice Profitability
• Review your fee schedule every year. Use ADA benchmarks or regional surveys to ensure you are keeping pace with inflation and cost of care.
• Renegotiate insurance contracts. Push for higher PPO reimbursements to avoid being locked into outdated rates.
• Monitor overhead proactively. Wages, labs, and supplies are increasing at faster-than-inflation rates—don’t let these categories erode margins without action.
• Optimize your payer mix. Too much dependence on low-paying plans will reduce practice value and profitability.
Planning Your Exit Strategy with Realistic Expectations
While some planning their exit strategy may not need top dollar for their business as they still enjoy practicing dentistry and know that revenue and profits are declining as they ‘let off the throttle’, others may need to be more strategic to ensure they achieve maximum value for their business to meet certain goals for retirement. If you need the money from the sale of your business, the key takeaway is to not fall victim to complacency and maintain collections but also manage your overhead.
