What Each Office Costs to Run: Facility Cost at a Five-Location Dental Group

The problem: Offices are compared on what they produce, because production is easy to pull, while what each one costs to keep open is spread across the group's books and never assembled by site.

The solution: Assign rent, utilities, supplies, equipment service, and non-provider staffing to the office that consumed them, so every location can be judged on what it contributes rather than on what it bills.

Every multi-location dental group has a leaderboard, and it is always made of production. Which office billed the most last month. Which doctor is up year over year. Which site is carrying the group. The numbers are pulled from practice management software in about four minutes, they are unambiguous, and they get discussed at every meeting.

Then there is the other half of the sentence, which nobody says out loud because nobody has the number: what did that office cost to produce it. Rent is in the accounting file, usually under a single occupancy account for the whole group. Supplies arrive from three distributors and get coded by vendor, not by location. Equipment service calls are paid as they come. Staffing runs through payroll, where the front desk and the hygiene team and the sterilization tech are all just employees of the group. Every piece of the cost side exists. None of it is assembled by site.

So the group ranks its offices on one number and manages on it, while the number that would actually change decisions has never been produced.

Production is not contribution

The gap between these two shows up fast once you look for it, because the cost side varies far more between offices than the revenue side does.

Rent is the obvious one. Two offices a few miles apart can differ by 60 percent per square foot, and one may be carrying 1,000 more square feet than it needs because that was the space available when it was signed. That difference is fixed, permanent, and completely absent from the leaderboard.

Supplies as a percentage of production vary more than most owners expect, and rarely for a reason anyone chose. One office orders from a different distributor at different pricing. One has a hygiene team that opens more than it uses. One does more of a procedure type with expensive materials. Nobody compares them, because supply spend is coded by who was paid rather than where it was consumed.

Equipment service is lumpy and quietly enormous. An office with older chairs, an aging compressor, and a sterilizer that fails twice a year can spend several times what a newer office spends, plus the chair hours lost when something is down. The service invoices get paid. They are not attached to the office.

Staffing is the largest line and the most uneven. Two offices with similar production can run very different non-provider headcount, because staffing grew historically around whoever was there rather than around what the schedule requires.

Add those up and the office that looks best on production is not reliably the office that contributes the most. Sometimes it is the opposite, because the office producing the most is often the one that grew, and growth is what added the space, the staff, and the equipment.

Why the accounting file cannot answer it

This is not a bookkeeping failure. QuickBooks is doing exactly what it was set up to do: record what the group paid, to whom, in what category. It is organized by vendor and by expense type, because that is what a tax return and a bank need.

What it is not organized by is location. The rent check covers five leases. The distributor invoice covers three offices. The payroll run covers everyone. To get to cost per office, somebody has to sit down and allocate every one of those, line by line, using knowledge that lives outside the accounting file entirely: which suite is which lease, who works where, which office the service call was for. It is genuinely a week of work, it is stale the moment it is finished, and so it gets done once, or never, or only when the group is considering selling.

That is why the leaderboard stays production-only. Not because anyone thinks production is the whole story, but because it is the only half that assembles itself.

A look at a dental group

Consider a dental group doing about $11 million a year across five offices, general dentistry with hygiene and some specialty referral kept in house, an owner-doctor who still produces two days a week, an office administrator who runs scheduling and billing for the group, and a bookkeeper handling the accounting.

Take the two offices the group considers its strongest, both producing at a similar level, and cost them out properly.

Office A produces about $1.9M. It occupies 3,600 square feet at $32 a foot, so rent and common charges run about $132k. Utilities near $26k. Supplies at 7.1 percent of production, about $135k. Equipment service and repairs, on a practice fitted out eleven years ago, about $41k. Non-provider staffing, seven and a half positions, roughly $606k. Total cost to operate: about $940k. Contribution before provider compensation: about $960k.

Office B produces about $1.8M, a hundred thousand less, and sits second on the leaderboard. It occupies 2,700 square feet at $26 a foot, so rent is about $70k. Utilities near $19k. Supplies at 5.4 percent of production, about $97k. Equipment service, on newer chairs, about $16k. Non-provider staffing, six positions, roughly $498k. Total: about $700k. Contribution: about $1.10M.

Office B produces less and contributes about $140k more. The leaderboard the group has been running on has these two in the wrong order, and it has had them in the wrong order for years.

The differences worth noticing are that no single line explains it. It is not one bad lease. It is a somewhat worse lease, plus an extra 900 square feet, plus 1.7 points of supply spend, plus aging equipment, plus one and a half more support positions, each of which is individually defensible and collectively decisive.

What the group would likely do with that is not close an office. It is smaller and more useful than that. The supply gap alone is worth roughly $30k a year and usually comes down to distributor pricing and ordering habits, which is a phone call and a standing order list. The staffing difference is a scheduling question worth examining before the next hire is approved. The equipment service line is the beginning of a real investment case: replacing the chairs stops being an expense to defer and becomes a return to calculate, once you can see what keeping them is costing in service calls and lost chair hours.

How the answer becomes available

The mechanism is straightforward and it is not a new accounting system. It is that every cost the group incurs needs to carry the location that consumed it, from the moment it is recorded.

Most of this is a one-time setup rather than ongoing effort. Leases, utilities, and equipment contracts are fixed and can be assigned once. Payroll already knows where people are scheduled. Supply orders can be placed and received by office rather than by group, which most distributors support and most practices do not use. Once those connections exist, cost per office is not an allocation project, it is just a view of records that already carry the right tag.

Then the recurring work comes off people. Nobody rebuilds a location comparison at year end. Cost per office, cost per chair hour, supply spend as a percentage of production, and contribution per site update continuously, and the exceptions raise their own hands: the office whose supply percentage has drifted up two quarters running, the equipment that has now been serviced four times this year, the site whose staffing cost per production dollar has moved away from the others.

The investment consequence is where this pays for itself. Groups at this size make a handful of large decisions, a lease renewal, an equipment replacement, an associate hire, a sixth location, and they typically make them on production and instinct. The office that looks strongest is the one that gets the new equipment and the new associate. If the ranking is wrong, the capital goes to the wrong place, and it goes there every time until the ranking is fixed.

How to start

You can build a credible version of this in a couple of days, without changing any software.

1. Assign the fixed costs first. Rent, common charges, utilities, and equipment contracts are known and stable. Put each one against an office.
2. Get supplies coded by location. Ask distributors to bill by ship-to address. This is the single highest-value change and it costs nothing.
3. Split payroll by where people work. Non-provider staff only. Providers are a separate question and mixing them in will muddy this one.
4. Compare contribution, not production. Production minus cost to operate, per office. Rank the offices on that instead.
5. Look at cost per chair hour too. Cost to operate divided by available chair hours tells you whether a location is expensive or simply underused, which are different problems.
6. Let it stay current on its own. Once costs carry a location tag at entry, the comparison maintains itself rather than being rebuilt by hand each year.

The takeaway

A dental group at this size knows exactly what each office bills and has no reliable idea what each office costs, because production assembles itself and cost does not. The result is a leaderboard that may have your locations in the wrong order, driving decisions about hiring, equipment, and leases that all flow toward whichever site looks best on the half of the picture that was easy to see. Assign the fixed costs, get supplies coded by ship-to, split staffing by location, and rank on contribution. The offices are likely to reorder, and the more valuable outcome is that the next lease, the next chair, and the next associate get placed against evidence rather than against the only number that was ever available.