February 27, 2023
Adam Hoeksema
The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 65,327 tax returns that were filed in the Dental Office industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their Dental Office.
We hope that this data will be helpful for you as a “reality check” for your financial projections and business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How Many dental offices in the US are Sole Proprietorships
There are approximately 65,000 dental offices in the US organized as sole proprietorships. We specifically analyzed 65,327 companies based on the 2019 IRS tax return data.
Average Annual Revenue for dental offices
The average annual revenue for all sole proprietorship dental offices in the U.S. was $343,584.
Average Annual Expenses for a dental office
The average annual expenses for all sole proprietorship dental offices in the U.S. was $246,550.
The raw dollar amount is less important here, the important thing to note is that all expenses for a dental office amounted to 72% of total revenue.
Average Net Profit Margin for a dental office
The average net profit margin for a dental office was 28%.
How much can I make by owning a dental office?
If you are wondering how much you might be able to make by owning your own dental office, you can get a good idea by creating a revenue projection based on the number of dentists you plan to have in your practice. Then you can estimate the number of patients per dentist and the total patient spend on dental services per year. That will give you total revenue, then simply multiply that by 28% (the net profit margin) to come up with a forecasted profit as the owner of the business.
Top 10 Expenses for a dental office
Based on the tax returns of 65,000+ sole proprietors operating in the dental industry, the following were the 10 largest business expenses as a percentage of revenue.
Average labor cost for a dental office
The average dental office spent 23% of revenue on labor costs. Learn more about specific dental office staff positions and costs.
Average material cost for a dental office
The average dental office spent 5% of annual revenue on material costs. This would be for things like disposable supplies used during routine services or material costs for fillings, dentures, implants, medication, etc.
Average rent expense for a dental office
The average sole proprietor dental office spent roughly 4% of annual revenue on rent.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 65,327 dental practice sole proprietorships in the U.S. in 2019. This will include businesses with a single dentist, but could also include a business with many dentists.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!
