Capture indirect costs
List recurring expenses that support the business but cannot be charged directly to one project.
Contractor financial planning
Contractor Overhead Calculator
Calculate the real cost of keeping your contracting business open, then convert overhead into practical rates per dollar of revenue, direct cost, billable hour, and job.
Choose an allocation rate
Compare overhead as a percentage of revenue, a markup on direct costs, a cost per hour, and a cost per job.
Protect your profit
Estimate break-even revenue and the annual revenue required to reach your target profit margin.
Monthly overhead expenses
Include recurring business costs that cannot be assigned directly to one job.
Business activity
Use annual figures from the same reporting period.
What should a contractor include in overhead?
Overhead generally includes the indirect costs required to operate the company: office and management payroll, payroll-related administrative costs, office or shop rent, utilities, general insurance, vehicle costs not assigned to jobs, software, phones, bookkeeping, legal services, licenses, advertising, and similar expenses.
Materials, subcontractors, equipment rentals, permits, and field labor attributable to a specific project usually belong in direct job costs instead. Keeping direct and indirect costs separate makes job-cost reports and pricing decisions more useful.
Contractor overhead formulas
Annual overhead
Monthly overhead × 12
Overhead percentage of revenue
Annual overhead ÷ annual revenue × 100
Overhead markup on direct cost
Annual overhead ÷ annual direct costs × 100
Overhead per billable hour
Annual overhead ÷ annual billable hours
Overhead per job
Annual overhead ÷ annual number of jobs
Target-profit revenue
(Direct costs + overhead) ÷ (1 − target margin)
How to use the results
No single allocation method is ideal for every contractor. A labor-heavy contractor may find overhead per billable hour useful, while a project-based company may prefer overhead per job. Revenue percentage and direct-cost markup methods work well for company-level planning and quick pricing checks.
Compare calculated rates with completed-job results. If projects appear profitable before overhead but the business still loses money, overhead may be understated, billable-hour assumptions may be too high, or prices may not recover enough indirect cost.
Contractor overhead calculator FAQs
What is contractor overhead?
Contractor overhead includes necessary business expenses that cannot be assigned directly to one project, such as office payroll, rent, insurance, vehicles, software, accounting, and marketing.
How is an overhead percentage calculated?
This calculator divides annual overhead by annual revenue to show overhead as a percentage of revenue. It also divides overhead by direct job costs to estimate an overhead markup rate.
Should labor be included in overhead?
Direct field labor performed for a specific job normally belongs in direct job costs. Office, management, estimating, and administrative payroll commonly belongs in overhead, although accounting practices vary.
How do contractors allocate overhead to jobs?
Common allocation methods include a percentage of revenue, a markup on direct costs, a cost per billable labor hour, or a cost per job. The best method should reflect how the company actually uses resources.
Is overhead the same as profit?
No. Overhead pays indirect operating expenses. Profit remains only after revenue covers direct job costs, overhead, fees, and other applicable costs.
How often should overhead rates be updated?
Review overhead at least quarterly and whenever staffing, insurance, rent, vehicles, software, or expected revenue changes materially.
Business-planning disclaimer
Results are educational estimates and are not accounting, financial, tax, legal, contracting, or pricing advice. Overhead classifications and allocation methods vary by company and accounting policy. Verify your records and decisions with qualified professionals when appropriate.
Created and maintained by Numeravo Technologies LLC.