Knowing overhead is essential for pricing.
In this article
Office
Rent and staff.
Vehicles
Fleet.
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Insurance
Company-wide.
Recovery
Markup.
Monitoring
Monthly.
A closer look
If revenue drops, the same overhead must be spread across fewer jobs. Monitoring monthly shows when pricing must change.
Where to start
Build an annual overhead budget and compare monthly.
An example
A contractor realized overhead had grown faster than revenue. Adjusting markup restored margins.
Common mistakes
Guessing overhead, not updating and ignoring revenue changes.
What to track
Track overhead as percent of revenue.
Questions to ask
What is our overhead? Is markup enough? What changed this year?
Who owns it
Owner and controller own the budget.
Run tighter jobs and win the right ones.
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Frequently asked questions
How do contractors recover overhead?
By calculating annual overhead and including a percentage in every estimate based on expected revenue or direct costs.