Business cost profile
Contractor Overhead Calculator
Convert annual business expenses into an overhead cost per realistic billable hour.
Annual business overhead
Overhead recovery result
Overhead recovery rate by utilization
The same annual overhead spread across different billable-hour estimates. Your current input is 75%.
| Utilization | Annual billable hours | Overhead per hour |
|---|---|---|
| 60% | 2,160 | $25/hr |
| 70% | 2,520 | $22/hr |
| 80% | 2,880 | $19/hr |
| 90% | 3,240 | $17/hr |
Your next step
Contractor Job Cost Calculator
Combine crew hours, materials, equipment, overhead and contingency into a construction job cost.
Continue to job costingThe method behind these numbers
How to recover business overhead in every job
Overhead is the cost of keeping the doors open. It does not belong to one job, but every job has to carry a share of it or the business never covers its own bills.
What this calculation tells you
Short answer. Overhead is the cost of keeping the business open: rent, insurance, vehicles, software, office wages and other indirect costs that cannot be traced to one job. Because it is not bought for a specific job, it must be recovered across the hours you can bill. QuoteFormula calculates overhead per billable hour as annual overhead divided by annual billable hours. Billable hours are productive hours multiplied by a realistic utilization rate. The result is an average recovery target to use in every job estimate, not a price for one particular job. Materials, subcontractors and job-specific equipment are direct costs and do not belong in overhead. Owner pay, profit and income taxes are financing and return decisions, not overhead recovery. Recalculate the rate whenever annual costs or billable capacity change, and use the same rate consistently across jobs so comparisons remain meaningful.
How this calculator works
The formula
overhead per billable hour = annual overhead ÷ annual billable hoursHow to use it
- Enter annual indirect business costs. Exclude job materials, subcontractors and equipment bought for one job.
- Enter the number of workers, productive hours per worker and a realistic utilization rate.
- Compare the resulting recovery rate with the overhead assumption used in your job estimates.
Reading the result
The rate is an average recovery target, not a charge for one particular job. If the result is higher than expected, look for misclassified direct costs or unrealistically optimistic billable hours before cutting the number.
Worked example
Illustrative example: $96,000 of annual overhead spread across two technicians who each provide 1,560 productive hours at 80% utilization gives 2,496 billable hours. Overhead recovery is $38.46 per billable hour.
Limitations
- The rate is an average; jobs that consume more supervision, travel or office time may need a higher allocation.
- Only indirect business costs belong here. Materials, subcontractors and job-specific equipment are direct costs.
- Owner pay, profit and income taxes are financing and return decisions, not overhead recovery.
Read the calculation methodology for the contracts behind every result or the full guide, How to recover business overhead in every job.
Frequently asked questions
- What costs belong in contractor overhead?
- Indirect costs that keep the business running: rent, utilities, insurance, vehicles, software, office wages, accounting and marketing. Materials, subcontractors and equipment bought for one job are direct costs and belong in that job's cost.
- Why divide overhead by billable hours?
- Overhead is not bought for a single job, so it has to be recovered across the hours the business can sell. Dividing annual overhead by realistic billable hours gives an average recovery target that every estimate can carry.
- Is owner pay part of overhead?
- No. Owner pay, profit and income taxes are return and financing decisions, not indirect job costs. Treating owner pay as overhead can hide how much the business actually needs to earn.