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Form CMB-018 Benchmark

Typical Contractor Overhead Percentage

Understanding typical overhead percentages by trade helps you benchmark your business against the industry and identify whether your costs are reasonable or inflated. Overhead as a percentage of revenue tells you how much of every dollar goes to keeping the lights on versus paying for jobs and generating profit. A contractor with 45% overhead keeps only 55 cents of every dollar for direct costs and profit combined. One with 25% overhead has 75 cents to work with. This difference directly affects how competitive your pricing can be and how much profit you retain. The data below draws from industry surveys across six major trades. Enter your own overhead and revenue to see where you fall, and whether reducing overhead could meaningfully improve your margins.

✓ Overhead Percentage

✓ How It Works

This calculator simplifies complex pricing decisions into clear, actionable numbers. Enter your specific values using the fields above. Trade presets provide industry-standard starting points that you can adjust for your situation. Results update as you type, giving you instant feedback on how each variable affects your bottom line. Every calculation runs in your browser with no data sent to any server. Save your inputs locally for quick access on return visits.

The formulas used are standard business accounting calculations adapted for the contracting industry. They account for the unique aspects of trade work: seasonal variation, weather delays, variable material costs, and the difference between billable and non-billable hours that salaried workers never think about.

✓ When to Use This

Use this calculator when preparing bids for new work, reviewing your current pricing structure, or planning for business changes like hiring employees, adding equipment, or expanding to a new service area. Run the numbers before making commitments that change your cost structure. Contractors who check the math before signing a lease, purchasing a vehicle, or setting new rates consistently make better financial decisions than those who rely on instinct alone.

✓ Frequently Asked Questions

What overhead percentage is normal for contractors?
Normal ranges by trade: plumbing 25-40%, electrical 22-35%, HVAC 30-45%, painting 18-30%, landscaping 25-35%, roofing 28-40%. Solo operators typically run at the low end. Companies with employees, vehicles, and office space run higher. The percentage is calculated as total overhead divided by total revenue. A solo plumber with $40,000 overhead on $160,000 revenue runs 25%. The same plumber with $60,000 overhead on the same revenue runs 37.5%. Revenue growth without proportional overhead growth is the path to efficiency.
How can I reduce my overhead percentage?
Two approaches: reduce absolute overhead costs, or increase revenue without adding overhead. On the cost side: shop insurance annually (savings of 10-20% are common), eliminate unused software subscriptions, negotiate vehicle maintenance contracts, reduce marketing spend on channels with low ROI, and consider whether office/shop space is fully utilized. On the revenue side: raise rates, add high-margin services, improve scheduling efficiency to fit more jobs per week, and reduce unbillable time. A 5% reduction in overhead percentage translates directly to 5% more net margin.
Is my overhead percentage too high?
Compare your percentage to the ranges for your trade listed above. If you are 5+ points above the top of the range, investigate where the excess is coming from. Common culprits: an oversized vehicle fleet, premium office space that does not generate revenue, excessive marketing spend, or insurance policies that have not been shopped in years. Sometimes high overhead is justified by the revenue it enables (a good shop attracts better employees), but it should be a conscious choice, not an unexamined default.
How does overhead percentage change as a business grows?
Overhead percentage typically decreases as revenue grows, up to a point. A solo contractor adding a second crew can nearly double revenue while adding only modest overhead (one more vehicle, incremental insurance). From two crews to four, overhead might hold steady as a percentage. Beyond that, you start needing office staff, a larger shop, fleet management, and the overhead percentage can climb back up. The sweet spot for many contractors is 2-3 crews with lean operations, where economies of scale work without bureaucratic overhead.
Should I include my own salary in overhead calculations?
It depends on the purpose of the calculation. For pricing and rate-setting: your salary is a separate line item in the hourly rate formula, not overhead. For financial reporting: if you pay yourself a salary through payroll, it appears in labor costs. If you take owner draws, it comes from profit. For overhead percentage benchmarking: exclude your salary to compare apples-to-apples with industry data, which typically separates owner compensation from overhead. The Overhead Calculator treats overhead separately from salary for this reason.

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