Annual Overhead Expenses
General liability, workers comp, vehicle insurance
Office rent, storage, shop space
Payments, fuel, maintenance, registration
Software, accounting, office supplies, bookkeeping
Purchases, rentals, repairs, depreciation
Google Ads, yard signs, website, directories
Business phone lines, internet, data plans
Any expenses not listed above
Business Volume
Total revenue billed to clients per year
Used to calculate overhead cost per job
Enter your expenses to see results
Fill in your annual overhead costs and revenue to calculate your overhead rate and per-job cost.
Contractor Overhead Guide
What overhead is, what rates are typical by trade and business size, and how to reduce overhead without sacrificing quality.
What Is Contractor Overhead?
Overhead is every business cost that is not directly tied to a specific job. Materials, subcontractors, and field labor are direct job costs. Insurance, rent, vehicle payments, office software, and marketing are overhead because they exist whether you have one job this month or ten.
Contractors divide overhead into two categories:
- Fixed overhead: Costs that stay the same regardless of how busy you are. Rent, annual insurance premiums, and loan payments on equipment fall here. You owe them even in slow months.
- Variable overhead: Costs that scale with business activity. Fuel, tool purchases, and advertising spend tend to rise when you are busier and shrink when you pull back.
Tracking overhead matters because it is the hidden number that determines whether you actually make money. A contractor who ignores overhead and bids only for direct costs is working for free for a portion of every job. Every estimate needs to recover its share of overhead before profit even begins.
Key Takeaways
- Overhead includes all costs not tied to a specific job (insurance, rent, vehicles, admin)
- Fixed overhead is owed every month regardless of job volume
- Every estimate must recover its share of overhead before any profit is earned
Typical Overhead Rates for Contractors
Most contractor businesses run overhead rates between 25% and 50% of revenue. Where you fall in that range depends on your trade, business size, and how efficiently you operate.
- Solo operators and small crews (1-3 people): 15-30% overhead rate. Lower fixed costs because there is no office staff, minimal rent, and simpler insurance needs.
- Mid-size remodeling companies (4-10 employees): 25-40% overhead rate. Office space, dedicated admin staff, multiple vehicles, and higher insurance push costs up.
- Larger general contractors (10+ employees): 35-50% overhead rate. Project managers, estimators, office staff, and larger equipment fleets create substantial fixed costs.
- Service trades (HVAC, plumbing, electrical): 30-45% overhead rate. Stocked service vehicles, dispatching systems, and on-call costs add up.
If your overhead rate is below 15%, you are likely underestimating or missing costs. If it is above 50%, you need to look hard at your largest line items before assuming the rate is accurate. A 40% overhead rate on $500,000 revenue means $200,000 per year in overhead to cover before any owner profit begins.
Key Takeaways
- 25-50% overhead rate is typical across most contractor trades and business sizes
- Solo operators often run 15-30%; larger companies run 35-50%
- Rates below 15% usually indicate underreported costs
How to Reduce Overhead Without Cutting Quality
Reducing overhead improves your profit margin without raising prices or cutting crew pay. The goal is to eliminate waste and negotiate better rates on necessary costs, not to skip coverage you actually need.
- Bundle insurance policies: Shop your general liability, commercial auto, and workers comp together with a single carrier. Most contractors save 10-20% compared to separate policies.
- Use technology to eliminate admin time: Estimating software, digital contracts, and job management apps reduce office hours without sacrificing quality. One hour of admin per job at $50/hr adds up fast across 50 jobs.
- Negotiate annual supplier and service agreements: Locking in annual pricing on materials, fuel cards, and equipment rentals protects against price increases and often earns a discount for commitment.
- Right-size your vehicle fleet: Every truck that sits idle is losing you money through depreciation, insurance, registration, and maintenance. One fewer vehicle can save $8,000-$15,000 per year.
- Review subscriptions quarterly: Software and service subscriptions accumulate. An annual audit of every recurring charge often reveals tools no longer in use.
- Market efficiently: Referrals and repeat clients have near-zero acquisition cost. A systematic follow-up process with past clients costs almost nothing and reduces your paid advertising spend.
Track overhead monthly. Overhead tends to creep up slowly through subscriptions, vendor price increases, and habit. Catching a 2-3% overhead increase early keeps your margins where they need to be.
Key Takeaways
- Bundling insurance policies typically saves 10-20% over separate coverage
- Estimating and job management software reduces admin overhead per job
- Review all recurring subscriptions quarterly to eliminate unused services
How to Use This Calculator
Enter Your Annual Overhead Expenses
Fill in each overhead category that applies to your business: insurance, rent, vehicle expenses, office and admin costs, tools and equipment, marketing, phone and internet, and any other fixed costs. Leave blank any category that does not apply.
Enter Your Annual Revenue
Input your total annual revenue, which is the amount you bill to clients each year. This number is used to calculate your overhead rate as a percentage of revenue.
Add Number of Jobs (Optional)
If you want to see how much overhead to recover per job, enter how many jobs you complete in a year. The calculator will divide total overhead evenly across jobs to give you a per-job overhead figure.
Review Your Overhead Rate and Metrics
See your total overhead, overhead rate as a percentage of revenue, monthly overhead, and overhead per job. Use the donut chart to identify which expense categories make up the largest share of your overhead.
Overhead Rate Formulas
Overhead Rate = (Total Overhead / Annual Revenue) x 100
Overhead Per Job = Total Overhead / Number of Jobs
Monthly Overhead = Total Overhead / 12Where:
- Total Overhead
- = Sum of all annual business expenses not tied to a specific job (insurance, rent, vehicles, admin, tools, marketing, phone)
- Annual Revenue
- = Total revenue billed to clients per year
- Overhead Rate
- = Overhead as a percentage of revenue. The portion of every dollar earned that goes to keeping the business running.
- Overhead Per Job
- = The share of annual overhead that must be recovered on each individual job to break even on overhead
- Monthly Overhead
- = Total annual overhead divided by 12, useful for cash flow planning and monthly budget targets
Free to Embed on Your Website
Add this calculator to your blog, resource page, or client portal — just copy one line of code. Your visitors get a useful tool, you get more engagement.
EstimationPro AI For Contractors, By Contractors Turn Your Calculations Into a Full Estimate
Go from quick calculations to detailed, line-item estimates your clients will trust.
Frequently Asked Questions
What is a good overhead rate for a contractor?
Most contractor businesses run overhead rates between 25% and 50% of revenue. Solo operators and small crews often land in the 15-30% range. Mid-size remodeling companies typically see 25-40%. Larger general contractors with office staff and project managers often run 35-50%. If your rate is below 15%, you may be missing costs. If it is above 50%, review your largest line items for savings opportunities.
How do I use my overhead rate when pricing jobs?
There are two common approaches. The first is to include overhead recovery directly in your markup. If your overhead rate is 30% of revenue, you need your markup to cover that 30% before any net profit begins. The second approach is to calculate overhead per job and add it as a line item in every estimate. For example, if your annual overhead is $80,000 and you run 40 jobs per year, you need to recover $2,000 per job just to break even on overhead.
What costs should I include in overhead?
Include every business expense that is not directly tied to a specific job. This means insurance (general liability, workers comp, commercial auto), rent and office space, vehicle costs (payments, fuel, maintenance, registration), office and admin (software, bookkeeping, office supplies), tools and equipment (purchases, rentals, depreciation), marketing and advertising, phone and internet, and any other recurring business expense. Direct job costs like materials, subcontractors, and field labor are not overhead.
What is the difference between overhead and profit margin?
Overhead and profit are separate. Overhead is the cost of running your business (insurance, rent, vehicles, admin). Profit margin is what remains after paying for all job costs and all overhead. A contractor with 30% gross margin and 25% overhead rate is only netting 5% profit. This is why many contractors underestimate profit: they forget that gross margin must first absorb overhead before any real profit begins.
How often should I recalculate my overhead rate?
Recalculate at least once per year, and again any time a major cost changes. Insurance renewals, new vehicle payments, additional staff, and office rent increases all shift your overhead rate. Running last year's rate on this year's bids can mean underpricing every job if costs have gone up. Many contractors do a quick overhead review each January as part of their annual pricing review.
Can I lower my overhead rate without cutting crew pay or quality?
Yes. The most common levers are: bundling insurance policies (often saves 10-20%), using estimating and job management software to reduce admin hours, negotiating annual supplier agreements for better pricing, right-sizing your vehicle fleet to eliminate idle trucks, and auditing subscriptions quarterly to cancel unused services. None of these require reducing crew wages, materials quality, or workmanship standards.
Why Contractors Choose EstimationPro AI
Estimates in 60 Seconds
AI generates detailed, line-item estimates from basic project details. No more hours on spreadsheets.
Accurate Pricing Data
Built on real contractor pricing and industry cost databases, updated for 2026 market conditions.
Professional Proposals
Send polished PDF estimates with your branding. Clients see a professional contractor they can trust.
Get Paid Faster
Built-in invoicing and Stripe payments. Collect deposits and progress payments directly from estimates.
Related Free Tools
Markup Calculator
Calculate your contractor markup, profit margin, and selling price instantly. Enter your costs and desired markup percentage to get accurate pricing.
Labor Cost Calculator
Estimate total labor costs for construction projects. Factor in hourly rates, crew size, project duration, and labor burden for accurate bids.
Painting Estimate
Calculate painting costs for any room or project. Enter room dimensions to get paint quantity, labor hours, material costs, and total estimates.
Square Footage
Calculate square footage for any shape — rectangles, triangles, circles, and complex rooms. Convert between square feet, yards, and meters.
Profit Margin
Calculate profit margin, markup percentage, and net profit for any job. Enter revenue and costs to see gross margin, net margin after overhead, and markup comparison.
Hourly Rate
Calculate your minimum billable hourly rate based on salary goals, overhead costs, billable hours, and desired profit margin.
Burdened Labor Rate
Calculate the true cost of an employee including payroll taxes, workers comp, health insurance, PTO, and benefits. See the burden multiplier and annual cost.
Bid Template
Generate a professional construction bid template. Fill in your project details, line items, and terms to create a downloadable bid document.