Contractor Overhead

What is overhead?

Overhead is the cost of keeping the business alive whether you are on a job or not.

These costs are not tied to one specific project, but they are still required to keep the company operating, bidding work, scheduling jobs, and supporting the field.

Common overhead costs

• Rent or office and shop space.
• Insurance.
• Vehicles and fuel.
• Admin time.
• Software.
• Marketing.
• Tools and equipment with ongoing cost.

Why contractors miss this

That is why a job can look profitable on paper while the business still feels short on cash.

• They focus only on job costs.
• They assume labor plus materials equals total cost.
• They ignore indirect time and business expense.

What happens when you ignore overhead

• Prices look profitable but aren't.
• Business grows but cash stays tight.
• Margins shrink over time.

How to think about it

This is the practical point: if the same business overhead is being carried by fewer jobs, each job has to absorb more of it.

• Overhead must be spread across jobs.
• Every job should carry part of the business cost.
• Fewer jobs means higher overhead per job.

Simple example

Monthly overhead: $10,000

Jobs per month: 10

Each job needs to carry $1,000 of overhead.

That means a job is not truly profitable until it has covered its labor, materials, and that share of business cost.

What to do instead

If you do this consistently, your pricing gets closer to reality and your margin numbers stop lying to you.

• Calculate your total overhead.
• Estimate jobs per month.
• Assign overhead to each job.
• Adjust pricing accordingly.