Form CMB-008 Cost tracking
Contractor Overhead Calculator
Overhead is the silent profit killer in contracting businesses. Unlike material costs that you can see on receipts and labor costs that you track on timesheets, overhead expenses accumulate quietly across a dozen categories: vehicle costs, insurance premiums, tool replacement, shop rent, phone plans, software subscriptions, marketing spend, licensing fees, and continuing education. Most contractors know their total overhead is 'somewhere around' a monthly number, but few have broken it down precisely and converted it to a per-billable-hour cost. That conversion is critical because it determines how much overhead to allocate to every job estimate. This calculator walks through each category, sums your total monthly and annual overhead, and divides by your billable hours to give you a concrete dollar amount that belongs in every hourly rate and job estimate.
✓ 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 counts as overhead for a small contractor?
Overhead is any business expense that does not directly tie to a specific job. The most common categories for contractors include: vehicle payments, fuel, insurance, and maintenance; general liability and umbrella insurance; tools and equipment purchases or replacements; shop, office, or storage rent; phone, internet, and technology; bookkeeping software and subscriptions; advertising, website, and business cards; professional licenses and permit fees; continuing education and safety training; uniforms and safety gear; and association memberships. If you would pay for it even on a day with no jobs, it is overhead.
What is a typical overhead percentage for small contractors?
Small contractors typically run 25-45% overhead as a percentage of revenue. Solo operators with low fixed costs might be at 20-30%. Contractors with employees, a shop, and multiple vehicles often run 35-50%. The percentage itself is less important than knowing your absolute number and allocating it correctly to each job. A contractor with 40% overhead who prices accordingly is more profitable than one with 25% overhead who ignores it in estimates.
How do I calculate overhead cost per billable hour?
Divide your total annual overhead by your annual billable hours. If your overhead is $48,000 per year and you bill 1,200 hours, your overhead cost is $40 per billable hour. This number should be added to your labor cost (or burdened labor cost) when calculating your hourly rate. Many contractors are shocked to discover their overhead per hour is $30-60, which explains why charging $50/hr for skilled trade work barely breaks even.
Should equipment purchases be classified as overhead or direct costs?
It depends on how the equipment is used. A tool that you use across many jobs over years (your work truck, your general tool set, diagnostic equipment) is overhead, typically amortized monthly. A tool purchased specifically for one job (a specialty fitting kit for a particular HVAC install) is a direct job cost. The distinction matters for accurate job costing: if you charge a specialty tool to overhead instead of the job that required it, every other job subsidizes that expense.
How often should I recalculate my overhead?
At minimum, annually. Many expenses change yearly: insurance premiums adjust, software prices increase, you add or remove a vehicle. Some contractors recalculate quarterly, which catches mid-year changes like a new tool purchase or a lease renewal at different rates. The most disciplined approach is to track actual overhead monthly and compare it against your projected overhead to catch drift early.