Practice Finance: Smarter Strategies for Dentists in 2025
6/23/2025 - By Ben Collier - Commercial Stories and Insights
In recent years, dental practices have had to overcome many obstacles, from supply chain delays during the pandemic to hygienists and dental assistants leaving the labor force in large numbers. As many businesses develop strategies to control rising costs in 2025, your dental practice may face unique challenges caused by inflation. Not only must you find ways to control expenses, but you also need to pay attention to rising labor costs, labor shortages, the potential impacts of changing tariffs, and shifting behaviors in patients’ dental procedure decisions. For current and aspiring practice owners, many of these challenges remain the same in 2025.
If buying an existing dental practice is part of your plan, it’s important to consider the various factors that can impact the sales price. Beginning with an accurate valuation of the business is always a good place to start. This process will reveal which aspects are influencing the sales price the most. In general, you can expect the purchase price to be calculated based on a percentage of the practice annual revenue (collections) or a multiple of the practice annual cash flow, also known as EBITDA (Earnings Before Interest Taxes Depreciation Amortization). Regardless of the calculation method, factors such as the age of its equipment and technology, the number of active patients, the practice’s reputation, practice profitability, visibility of its location, and whether the location is rural or urban could push the sales price to the higher or lower end of the range.
While evaluating your plans to purchase or expand your dental practice, it is critical to have your financing in place. An attractive choice could be SouthState’s Practice Finance Program – a lending program specifically designed for the acquisition or expansion of dental practices with loan terms up to 10 years. One component of this special program is the ability to lend on the goodwill of the practice as a tangible asset. These tailored financing solutions offer opportunities for acquisition or growth that might not have been possible otherwise.
Many are monitoring the Consumer Price Index for 2025 to try and anticipate the changes in inflation that could be experienced this year. The purchasing power of both dental practice owners and dental patients will be directly impacted by the inflation rate.
Inflation has led to increased operating costs for dental practices, and it is creating mounting financial pressures for dental patients and other businesses alike. Patients may find themselves making decisions to forgo elective dental treatments, such as cosmetic dentistry or orthodontics. Employers and employees could also feel it is necessary to move to less expensive insurance plans with reduced benefits. Either one of these scenarios will have trickle down effects for dental practice owners.
Beyond the initial costs of starting or purchasing a dental practice, the rising costs of overhead expenses will directly impact the profitability of the business. The American Dental Association recommends that a dental practice’s overhead costs be between 59% and 62% of gross revenue, including payroll, supplies, lab fees, insurance, taxes, rent, and utilities. The largest of these overhead expenses is often the cost of labor and benefits.
According to the American Dental Association (ADA) Health Policy Institute (HPI), roughly 62% of dentists said staffing shortages would be the biggest challenge facing their practices in 2025. About 90% of dentists also identified the process of recruiting dental hygienists very or extremely challenging. However, first-year enrollment in dental hygiene programs increased by nearly 20% from 2020-21 to 2024-25. This HPI data indicates that more dental hygienists could be entering the workforce in the next few years. In the meantime, staffing shortages still exist and with that comes increased labor costs.
As the operating costs for dental practices have consistently risen over the past few years, insurance reimbursements have also played a role. ADA’s Health Policy Institute reports that reimbursements have stayed relatively the same and this discrepancy has become a primary concern for dental practice owners in 2025. This is one more challenge where dentists may be feeling the pinch in their profit margins.
How Much Does It Cost to Buy a Dental Practice?
If buying an existing dental practice is part of your plan, it’s important to consider the various factors that can impact the sales price. Beginning with an accurate valuation of the business is always a good place to start. This process will reveal which aspects are influencing the sales price the most. In general, you can expect the purchase price to be calculated based on a percentage of the practice annual revenue (collections) or a multiple of the practice annual cash flow, also known as EBITDA (Earnings Before Interest Taxes Depreciation Amortization). Regardless of the calculation method, factors such as the age of its equipment and technology, the number of active patients, the practice’s reputation, practice profitability, visibility of its location, and whether the location is rural or urban could push the sales price to the higher or lower end of the range.While evaluating your plans to purchase or expand your dental practice, it is critical to have your financing in place. An attractive choice could be SouthState’s Practice Finance Program – a lending program specifically designed for the acquisition or expansion of dental practices with loan terms up to 10 years. One component of this special program is the ability to lend on the goodwill of the practice as a tangible asset. These tailored financing solutions offer opportunities for acquisition or growth that might not have been possible otherwise.
How Does Inflation Affect Dental Businesses?
Many are monitoring the Consumer Price Index for 2025 to try and anticipate the changes in inflation that could be experienced this year. The purchasing power of both dental practice owners and dental patients will be directly impacted by the inflation rate. Inflation has led to increased operating costs for dental practices, and it is creating mounting financial pressures for dental patients and other businesses alike. Patients may find themselves making decisions to forgo elective dental treatments, such as cosmetic dentistry or orthodontics. Employers and employees could also feel it is necessary to move to less expensive insurance plans with reduced benefits. Either one of these scenarios will have trickle down effects for dental practice owners.
How Will Dental Practice Profit Margins Be Affected?
Beyond the initial costs of starting or purchasing a dental practice, the rising costs of overhead expenses will directly impact the profitability of the business. The American Dental Association recommends that a dental practice’s overhead costs be between 59% and 62% of gross revenue, including payroll, supplies, lab fees, insurance, taxes, rent, and utilities. The largest of these overhead expenses is often the cost of labor and benefits.According to the American Dental Association (ADA) Health Policy Institute (HPI), roughly 62% of dentists said staffing shortages would be the biggest challenge facing their practices in 2025. About 90% of dentists also identified the process of recruiting dental hygienists very or extremely challenging. However, first-year enrollment in dental hygiene programs increased by nearly 20% from 2020-21 to 2024-25. This HPI data indicates that more dental hygienists could be entering the workforce in the next few years. In the meantime, staffing shortages still exist and with that comes increased labor costs.
As the operating costs for dental practices have consistently risen over the past few years, insurance reimbursements have also played a role. ADA’s Health Policy Institute reports that reimbursements have stayed relatively the same and this discrepancy has become a primary concern for dental practice owners in 2025. This is one more challenge where dentists may be feeling the pinch in their profit margins.
Managing the Impact of Inflation
- Understand and Regularly Review Your Financials
- Consider Creative Ways to Recruit and Retain Talent
- Assemble Your Advising Group
- Invest in Training and Development
4 Tips to Manage the Impact of Inflation
SouthState is proud to have team members with specific areas of expertise including Ben Collier, Director of Practice Finance. Ben has gained nearly 20 years of experience in helping dental practice owners navigate financial strategies for their business. When asked what dental practice owners should do to manage the stresses of inflation in 2025, Ben had these 4 tips to share:
1. Understand and Regularly Review Your Financials
Be sure to have a complete understanding of your expenses, your current fee schedules, and your profit and loss statements. Spend time with your bookkeeper or CPA to review your financials on a monthly basis. If you don’t already understand how to read your financial statements, don’t be shy about asking for help.Variable expenses are an area where you may find room for improvement. If your supplies costs have been increasing over time, ask a staff member to review your current vendors to ensure you are receiving the most competitive pricing. When your vendor learns you are paying close attention to their prices, they may be willing to extend special offers to retain your business. If you find the need to change suppliers all together, your local dental society or association may be able to provide recommendations for endorsed vendors.
During your financial review, you may also determine you require more efficient methods to monitor your cash flow. SouthState’s Treasury Navigator is a highly secure treasury management tool that offers streamlined expense and revenue management through ACH, wire transfers, remote deposits, and more. This product is also helpful in tracking financial activity for multiple locations. When you have a thorough understanding of the money flowing in and out of your practice, you can make more educated and timely decisions on how to mitigate any issues that arise.
In addition to putting steps in place to manage your cash flow, explore ways to increase your revenue by reviewing your fee schedule on an annual basis. This process should involve evaluating your fees against those of your competitors to ensure that you remain competitive while not falling below the market rate. The greatest control over profit margins resides within your fee structure. Hesitation to adjust fees may restrict the income potential of your practice.
2. Consider Creative Ways to Recruit and Retain Talent
You are competing with other dental practices for the same small pool of dental hygienists and dental assistants. This means your benefits package, working environment, and opportunities for advancement need to set you apart from the competition. A unique way to expand your employee benefit package is to provide access to discounted banking services and financial experts. The SouthState at Work program is designed for businesses to offer their employees access to checking accounts with reduced fees, financial wellness education, and other added benefits such as interest discounts on new consumer loans.
Offering opportunities for cross-training and career advancement can be effective in attracting new talent. Clearly defined promotion pathways and role flexibility are likely to appeal to candidates considering new employment opportunities. For example, a dental hygienist could also be trained to handle office procurement. This could benefit the practice owner by not only reducing staffing costs but also by assigning responsibility for identifying cost-saving measures.
Providing incentives for cost reduction, patient referrals, or boosting satisfaction scores could be the difference in a potential candidate accepting your offer over your competition’s. These additional money-making opportunities will contribute to supporting a strong and collaborative work culture.
3. Assemble Your Advising Group
Surround yourself with professionals that will provide you with sound advice on different areas of your practice. These roles should include a CPA, attorney, insurance agent, financial advisor, business consultant and trusted banker. Even though you won’t necessarily need services from each of these professionals every day, it is crucial to have an established relationship with someone already familiar with your practice.While members of this group can help you fine-tune the health of your dental practice, make sure you don’t lose sight of your personal financial health. From an investment strategy to retirement planning, SouthState can create a plan that evolves with your goals.
4. Invest in Training and Development
Take time to invest in yourself with ongoing training and development. Owning and operating a dental practice can be all-consuming and there are days where everything feels like it should take priority. However, the future success of your practice depends on your ability to continually be on top of all the advances in dental procedures and new technology available to improve operating efficiencies. Having an experienced team in place will help with this need, but it is still your responsibility to set the vision and goals for your practice.Just as important as carving out time for professional development is dedicating time to rest and recharge. It may seem impossible to escape the day-to-day responsibilities of owning a business, but taking time away from the office can help in preventing burnout.
Whether you are starting or expanding your dental practice in 2025, this year remains full of opportunities for further change. By being proactive in your financial management strategies, actively recruiting for open positions, and finding innovative ways to increase revenue, you can position your dental practice for sustainability and future growth.
