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- Overhead and profit (O&P) is what you add to the direct costs of a job to cover the cost of running the business and earn a return.
- Here overhead is a percentage of direct costs. Profit can be a margin on the final price or a markup on cost.
- A 10% profit margin and a 10% profit markup give different prices, so pick one method and stay consistent.
- Use the result as a starting bid, then check it against your market and the lowest profit you will accept.
How to use the contractor overhead and profit calculator
Enter direct job costs
Add materials, labor, subcontractors and other costs that belong to this job, such as equipment rental, permits and dump fees.
Set your overhead rate
Type the percentage you already know, or switch to Work it out and enter your yearly overhead and yearly direct job costs. The calculator divides one by the other.
Choose the profit you want
Enter the profit percentage. Open the profit method option to choose a margin on price or a markup on cost.
Read the bid price
The result shows the bid price, the overhead and profit in dollars, and the price you would get with the other profit method.
How overhead and profit are calculated
Direct costs are the costs that belong to one job. Overhead is the cost of running the business that you cannot tie to a single job. Profit is what you keep on top of both.
Bid price
Overhead rate % = yearly overhead ÷ yearly direct job costs × 100
Total cost = direct costs × (1 + overhead rate)
Price with a profit margin = total cost ÷ (1 − margin)
Price with a profit markup = total cost × (1 + markup)
The overhead rate is measured against direct costs, so apply it to direct costs on every job.
Contractor overhead and profit examples
Example 1: A kitchen remodel
Direct costs are $24,000: $12,000 in materials, $8,000 in labor, $3,000 for subcontractors and $1,000 for equipment and permits. Overhead is 15% and the profit target is a 10% margin.
- Overhead (15% of $24,000) $3,600
- Total cost $27,600
- Bid price at a 10% margin $30,667
- Profit $3,067
- Bid price at a 10% markup $30,360
The margin method asks for about $307 more than the markup method on the same job. Across a year of jobs, that gap adds up.
Example 2: Working out the overhead rate
A contractor spends $120,000 a year on overhead and has $600,000 of direct job costs across the year.
- Overhead rate 20%
- Overhead on a $24,000 job $4,800
- Total cost $28,800
- Bid price at a 10% margin $32,000
A 20% overhead rate lifts the same job from $30,667 to $32,000 at the same profit margin.
Margin vs markup
Margin is profit as a share of the selling price. Markup is profit as a share of cost. A 25% markup equals a 20% margin, and a 10% margin equals about an 11.1% markup. Mixing them up is one of the easiest ways to underprice a job.
Common overhead costs
- Office rent, utilities and phone
- General liability and other business insurance
- Vehicles, fuel and truck maintenance
- Office staff, estimating and admin wages
- Software, licensing and accounting fees
- Marketing and advertising
Who uses an overhead and profit calculator
Remodelers
Price kitchen, bath and whole-home projects with overhead built in.
Roofers and exterior crews
Turn material and labor estimates into a bid that still pays the bills.
Electricians and plumbers
Add overhead to service and install jobs so every ticket earns its share.
Small general contractors
Compare margin and markup before sending a bid to a client.
Overhead and profit rates differ by trade and region. Compare your bid with local prices, and use the markup calculator to see what markup your price represents. For crew costs, try the fully loaded labor rate calculator, and for materials the roofing calculator.
Contractor overhead and profit calculator FAQ
What is overhead and profit for a contractor?
Overhead is the cost of running your business that is not tied to a single job, such as insurance, office costs and vehicles. Profit is what you keep after all costs. Contractors add both to direct job costs to reach the bid price.
What is a normal overhead and profit percentage?
It varies by trade, region and company size. Many contractors work from their own numbers by dividing yearly overhead by yearly direct costs. Use your own figures rather than a rule of thumb.
Should overhead be a percentage of direct costs or of revenue?
Either can work if you stay consistent. This calculator uses a percentage of direct costs because it is easy to apply to any job estimate.
What is the difference between a 10% margin and a 10% markup?
A 10% margin means profit is 10% of the price. A 10% markup means profit is 10% of your cost. On a $27,600 total cost, the margin gives a price of $30,667 and the markup gives $30,360.
Does overhead include my own pay?
If you work in the business, count a fair wage for your time in labor or overhead. Otherwise your profit is really just your wage.
Is this a quote I can send to a client?
Treat it as a starting point. Check material prices, taxes, permits and local rates before you send a final bid.