How to Calculate Contractor Overhead (and Add It to Every Job)
Overhead is everything it costs to stay in business that no single job pays for on its own. If it is not inside your prices, it comes straight out of your profit.
Step 1: List a year of overhead
Use last year's bank statements or a realistic budget. An illustrative small trade business:
| Truck payment, fuel, maintenance | $9,600 |
| Insurance (liability, vehicle) | $6,000 |
| Phone and software | $2,400 |
| Shop or office rent | $12,000 |
| Accounting and bookkeeping | $3,000 |
| Small tools and consumables | $6,000 |
| Marketing and listings | $9,000 |
| Total annual overhead | $48,000 |
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Leave out job materials and the labor on jobs: those are direct costs.
Step 2: Turn it into a rate
- As a percentage of direct costs: $48,000 ÷ $200,000 of yearly materials and job labor = 24%.
- Per billable hour (useful for service calls): $48,000 ÷ 1,600 billable hours = $30 per hour.
Pick one method and use it consistently. Recalculate at least once a year or when a big cost changes.
Step 3: Add it before you apply your margin
| Direct cost of the job | $2,000.00 |
| Overhead: $2,000 × 24% | $480.00 |
| Total cost | $2,480.00 |
| Price at a 25% margin: $2,480 ÷ 0.75 | $3,306.67 (profit $826.67) |
What happens if you skip it
Price the same job from direct cost only: $2,000 ÷ 0.75 = $2,666.67. Once the $480 of overhead is paid, real profit is $186.67, a 7% margin instead of the 25% you planned.
Next: include true labor cost with the labor burden calculator (see how to calculate labor cost), check the price with the job price calculator, and see markup vs margin or the full method in how to price a contractor job. Find the number of jobs that covers your overhead with the break-even calculator.
Want it built into your quotes?
The Contractor Quote & Margin Sheet adds your overhead and prices each job from your target margin in Google Sheets or Excel, so every quote starts from your real cost.
Figures are illustrative estimates for planning only. This is not accounting, tax or legal advice.