Is Your Practice Eating You Alive? What the 25% Overhead Rule Means for Your Income

Introduction: Grossing More, Keeping Less

Here's a scenario that's more common than most healthcare practice owners want to admit.

The practice is doing well by external measures. Revenue is up. Patient volume is solid. The waiting room is full. But the owner's bank account tells a completely different story — flat, thin, and nowhere near what the numbers on paper suggest it should be.

If this is familiar, you likely don't have a production problem. You have an OPEX problem. And until you name it, no amount of additional revenue will fix it.

What Is OPEX Creep — And Why It's Silently Killing Your Practice

OPEX Creep is what happens when operating expenses — rent, utilities, software, marketing, administrative costs — gradually climb above sustainable benchmarks without triggering any single alarm loud enough to act on.

In the tech industry, this is called burn rate, and it's treated as an existential threat to a company's survival. In healthcare, we tend to ignore it. Because we are mission-driven, because we focus on patient care above everything, we often don't look at the math until the bank account is nearly empty or a crisis forces the conversation.

The result is a practice that looks successful on the outside — full schedule, growing revenue, expanding team — while the owner is quietly becoming what I call a high-level volunteer. Showing up every day, carrying everything, and taking home a fraction of what the business generates.

The 25% Benchmark: Why This Number Changes Everything

Here is the benchmark that most healthcare practice owners have never been given:

Your operating expenses should not exceed 25% of your gross revenue.

If you are above 25% — whether you're at 30%, 40%, or higher — every new patient you see is feeding the overhead before it feeds you. More volume does not solve the problem. It scales it.

At 40% OPEX, you are effectively paying what I call a chaos tax every single day. A structural penalty that compounds quietly in the background, siphoning profit out of the business before you ever have a chance to direct where it goes.

The 30% Allocation Standard: Where Your Money Should Go

Based on my work with healthcare practices, here is the structural benchmark I use across financial audits:

• Operating expenses (rent, utilities, marketing, overhead): 25% of gross revenue

• Non-production payroll (staff not directly generating revenue): 30–35%

• Owner allocation: 30%
  

When these three categories are aligned, the business runs as what it should be: a balanced machine that pays its owner fairly, sustains its team, and covers its operational costs without cannibalizing profit.

In practice, most structural audits reveal that the owner allocation — the 30% — is the first number to get cut. The landlord gets paid. The staff gets paid. The vendors get paid. And the owner takes whatever is left. Most months, that is not 30%. It is closer to 10%, or less.

A Real Example: From 41% to 32%

One of the doctors I worked with had operating expenses sitting at 41% of her gross revenue. When we ran the diagnostic together, the biggest driver was payroll — staff members who were on the books but not producing at the level that justified their compensation. The numbers simply didn't add up.

We categorized every expense line by line. General office expenses. Occupational costs. Marketing spend. Professional fees. Payroll. Once everything was visible and benchmarked, the hard decisions became clearer.

After the restructuring, her OPEX dropped from 41% to 32%. That shift — without adding a single new patient or service — fundamentally changed what she was able to keep and reinvest.

For context: when I ran my own audit for the first time, my OPEX was at 61%. I was spending 61 cents of every dollar I earned before I ever thought about paying myself. I wasn't directing the money — I was just watching it leave.

Why Adding Patients Won't Fix This

This is the belief that keeps practice owners stuck in the OPEX trap: if I just see more patients, if I just grow revenue, the margins will improve.

They won't. Not until the structure changes.

More revenue into an unstructured overhead model creates more expenses — more staff to handle volume, more equipment, more administrative complexity. The overhead grows proportionally with the revenue, and the owner's percentage stays flat or shrinks.

Growth doesn't solve OPEX Creep. A structural audit does.

You Wouldn't Treat a Patient Without a Diagnostic

As a healthcare provider, you wouldn't walk a patient through treatment without first understanding what you're treating. You use diagnostic tools — imaging, labs, assessments — to see clearly before you act.

Your practice deserves the same standard.

The Profit Leak Scorecard is a 3 to 5 minute structural audit that gives you a score across three areas: your financial structure and overhead benchmarks, your operational systems, and your CEO leverage. It shows you exactly where the leaks are — so you stop guessing and start fixing.

Take the Profit Leak Scorecard now. → https://drlaurettajustin.com/profit-leaks-scorecard-quiz

Quick Summary

• OPEX above 25% means every new patient is a liability, not an asset

• OPEX Creep is the silent, gradual climb of expenses that cannibalizes owner pay

• The 30% Allocation Standard: 25% OPEX, 30–35% non-production payroll, 30% owner allocation

• Paying a 'chaos tax' at 40%+ OPEX is a structural problem — not a revenue problem

• The fix starts with a diagnostic, not more production

• Take the Profit Leak Scorecard to see your exact structural score

FAQ

What counts as operating expenses (OPEX)?

OPEX includes rent, utilities, marketing spend, software subscriptions, office supplies, and any administrative overhead costs not directly tied to clinical production. It does not include payroll or owner compensation — those are tracked separately in the allocation framework.

What if my OPEX is above 25% — where do I start?

Start with categorization. List every expense by type — occupancy, marketing, general office, professional fees — and calculate what percentage of gross revenue each category represents. Once you can see the breakdown, the largest drivers of excess usually become obvious. Payroll and occupancy costs are the most common culprits.

Is 30% owner allocation realistic for my practice?

It is a benchmark target, not a day-one requirement. Most practices that are above 25% OPEX will need to restructure expenses before the owner allocation can reach 30%. The goal is directional: the owner should be moving toward that number intentionally, not waiting for leftover funds.