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How Much Should Rent, Staff, and Marketing Actually Cost Your Practice? A Distributor’s Percentages

Here’s a story from our conversation with Andy Austin. A dentist in Nashville — at the time the fastest-growing city in America — couldn’t figure out why his practice wasn’t growing. Austin sat down with him and asked to see the marketing spend. It took a while to find, because the practice didn’t really have a P&L, it had receipts. The answer: $1,800 for the year. A sign at the baseball field and a Yellow Pages listing.

A million-dollar practice, ninety new residents arriving every day, and nobody within ten miles knew it existed.

Austin is the sales manager at Nashville Dental Inc., a family-owned distributor that has been at this since 1905 — same family, four generations, now covering nine states. He came up through pharmaceuticals, then Tulsa Dental, then management at Patterson, and his view of the modern distributor’s job is refreshingly blunt: getting cotton rolls into a box and to your door by tomorrow is table stakes now — a certain large online retailer settled that. The real work is sitting down inside the business: the finances, the staffing, the marketing, the lease timing. That’s the conversation we had, and it comes down to thinking in percentages.

Percentages, not dollars

Austin’s favorite mistake to correct: the doctor who panics about a big supply bill in isolation. A $6,000 supply bill in a $100,000 month isn’t a problem — it’s six percent, right where it belongs. The dollar amount means nothing without the denominator.

His analogy is the household light switch. Yes, turn the lights off — but electricity is three percent of your life, so give it three percent of your attention. “The people that struggle spend 70 percent of their time fussing at their kids over a light.” Owners who obsess over the smallest controllable line while the big ones drift are running the practice backward.

So here are his working ranges. Supplies: five to six percent of the business — and five to six percent of your attention. Staff: 22 to 28 percent. Rent: he wants facility costs in the low-to-mid teens as a share of overhead — if a third of your overhead is going to the landlord, no amount of production fixes the math, and you chose the wrong space. Marketing on an established practice: two to three and a half percent of collections — $20,000 to $35,000 a year on a million-dollar practice, which is why $1,800 was the whole diagnosis. Startups are different: expect to run around eight percent for the first 18 to 24 months while you build a patient base, then dial it back deliberately rather than letting it linger.

One warning on the low side, because it’s counterintuitive: dramatically underspending a category usually isn’t savings, it’s a symptom. The practice underpaying on marketing isn’t frugal — it’s invisible.

Two rules for the new grad

Austin gets in front of dental students regularly, and he opens with the same question: who here hates the car they’re driving? Because he knows the first associate paycheck has an $85,000 Acura’s name on it. Last time he did this, two students in the front row started laughing — he’d described their exact plan. His rule: do not buy the car. Nothing torpedoes practice financing like fresh consumer debt on a six-figure student loan base.

The second rule explains the first: for the initial 24 to 36 months, you are the business. The bank’s loan rides on your personal guarantee and your personal credit until the practice can stand on its own history. Every financial decision you make in that window is a practice decision wearing streetclothes. (His third rule, offered tongue-in-cheek and meant completely: don’t get divorced mid-project. It doesn’t make ownership impossible — “just add three or four years to everything.”)

What a team gets you: $600,000 versus $1.2 million

The sharpest story of the episode. A young doctor went shopping for financing the do-it-yourself way — a little internet research, a walk into a bank — and came away with $600,000. In today’s construction market, Austin’s assessment was that this buys “half a chair and a flashlight.”

She texted him. Nashville Dental pulled her into their Dental Strategic planning process — production history, business plan, cash-flow projections, the way underwriters actually evaluate a deal — and assembled the team: distributor, lender, contractor, real estate. The same doctor, repackaged, qualified for $1.2 million. She bought the practice she wanted and the building it sits in, cash-flowing from day one, owning her real estate on the first deal. Same borrower. Different preparation.

The last three years are the whole ballgame

For the late-career doctors, Austin repeats one thing until he’s hoarse: your practice gets valued on its final three years — and those are exactly the years most owners coast. The passion fades, production drifts down, and the practice they finally bring to market reflects it. They call him 12 to 18 months from their intended exit, he pulls the numbers, and the hard conversation follows: this wasn’t your best effort, and the sale you want is now two to three years further away. Sellers who ramp up instead of throttling down keep their timeline and their price. (You may notice every transitions-adjacent guest we’ve had says a version of this. It keeps being true.)

Use your unpaid consultant

Here’s the mental reframe Austin argues for: your supply rep sees a hundred offices a year, costs you no salary, no benefits, no PTO — and knows what the practices that outperform yours do differently. Most owners treat that resource as a person who drops off gloves.

And sometimes the consulting is a clean bill of health. Austin says several of his recent sit-downs ended with: you’re doing everything right — $1.4 million produced, 36 percent to you, change nothing. “A $450,000 living from a small business is a pretty good living. Climb Kilimanjaro — but you only need to climb it once.”

Where he does consistently find six-figure damage: PPO contracts. A reimbursement schedule signed casually at 27 can follow you for decades — he’d just told a doctor the crown rate they signed eleven years ago was among the lowest in Tennessee, and there was nothing left to do about it. Don’t credential yourself off YouTube University; get professional eyes on every payer contract before you sign, because you start where the contract starts, and raises from a bad baseline never catch up.

The real estate notes we underlined

Naturally we asked about site selection. His current Nashville list: parking first — road frontage matters less than it used to, but if patients can’t easily get in and park, nothing else matters. Second, who’s your neighbor — the vape shop next door is part of your brand whether you like it or not. On saturation, he wants to see roughly 2,000 to 5,000 available residents per practice, and his cautionary example is every young dentist’s favorite suburb, where the ratio has collapsed to the point that “you’d better capture the entire neighborhood behind you.”

And one horror story for the diligence file: a buildout finished, ribbon ready to cut — and nobody had confirmed the space was zoned for dental use. The office sat dark for 90 days while it got resolved. Whatever the cheaper contractor saved per square foot, it wasn’t that.

Invest when everyone else is hiding

Austin has watched several downturns from the supply side, and the pattern repeats: when times tighten, most owners sit on their hands. The ones who invest in their practices during the tight years — equipment, marketing, facility — are the ones who slingshot past everyone when the cycle turns. “The ones that struggle three years from now will be the ones who said: I’m not doing anything this year.”

It pairs with his favorite piece of received wisdom, from his college football coach, who put an undersized Austin into the lineup knowing he’d make mistakes: everyone makes mistakes — I picked you because you make them at full speed. The players who get hurt are the ones going 80 percent. Dentistry’s version: the bank sees a 97-98 percent success rate on practice loans. The risk isn’t going all-in on ownership. It’s hedging.

The full conversation with Andy Austin is on the Dentelligentsia podcast. And if the percentage that’s off in your practice is the rent one — talk to us.