Key takeaways
- Overhead is every cost you have whether or not you're on a job — insurance, truck, tools, phone, software, fees.
- Your overhead rate = monthly overhead ÷ billable hours. Add it to every bid.
- Forgetting overhead is the number-one reason "busy" contractors stay broke.
- Recalculate it a couple times a year — costs creep up on you.
Short version: overhead is every cost of being in business that isn't labor or materials for a specific job. To actually use it, turn it into an hourly rate — add up a month of overhead and divide by the hours you can bill. That number gets baked into every quote.
What counts as overhead?
If you'd still pay it during a slow week with no jobs, it's overhead. The usual suspects:
- Insurance (liability, vehicle, workers' comp)
- Truck or van — payment, fuel, maintenance
- Tools and equipment
- Phone and internet
- Software and subscriptions
- License, permits, and fees
- Accounting and bank fees
- Marketing
- Rent or storage, if you have it
Your own pay is not overhead — that's labor. Overhead is the cost of keeping the doors open.
How do I turn overhead into an hourly rate?
Add up a typical month, then divide by the hours you can actually bill that month.
Example: $3,400/month in overhead ÷ 120 billable hours = about $28/hour. Every job has to cover that $28 an hour before it contributes a dollar of profit.
From there, that overhead rate goes into the full price of every job, right alongside labor, materials, and margin.
Why billable hours, not total hours?
Because you can't bill for quoting, driving, or buying materials. If you only bill 25–30 hours of a 50-hour week, your overhead has to be covered by those billable hours — which makes the rate higher than people expect. (More on that in how much to charge per hour.)
How often should I recalculate?
Twice a year, or any time a big cost changes — a new truck, an insurance jump, a new software subscription. Overhead creeps, and a number that was right last year quietly makes you cheaper this year.
This is exactly what JobPricer does for you: enter your overhead once and every quote shows labor, materials, overhead, and your real profit before you hit send.
Try it free →Frequently asked questions
What's included in contractor overhead?
Everything you pay to be in business that isn't tied to one specific job: insurance, vehicle costs, tools, phone, software, licenses and fees, accounting, and marketing. Your own wage and a job's materials are not overhead.
What is a good overhead percentage for a contractor?
It varies a lot by trade, but many small contractors land somewhere around 20–35% of revenue. Don't chase a percentage — calculate your real dollars and turn them into an hourly rate.
Is my own salary part of overhead?
No. The money you pay yourself for doing the work is labor. Overhead is the non-job cost of running the business. Keeping them separate is what lets you see your real profit.
CWritten by Craig, founder of JobPricer
I ran a contracting business and finished 500+ jobs before I built JobPricer. Everything here is what I wish someone had told me when I started quoting.