Contractor Overhead Calculator Formula
Understand the math behind the contractor overhead calculator. Each variable explained with a worked example.
Formulas Used
Overhead Rate
overhead_rate = revenue > 0 ? (overhead_costs / revenue) * 100 : 0Revenue After Overhead
revenue_after_overhead = revenue - overhead_costsMonthly Overhead
monthly_overhead = overhead_costs / 12Variables
| Variable | Description | Default |
|---|---|---|
overhead_costs | Total Overhead Costs(USD) | 45000 |
revenue | Total Revenue(USD) | 300000 |
How It Works
How to Calculate Contractor Overhead Rate
Formula
Overhead Rate = (Overhead Costs / Revenue) x 100
Overhead includes all indirect costs of running your business: insurance, rent, utilities, vehicle expenses, office supplies, accounting, marketing, and administrative salaries. Knowing your overhead rate helps you price jobs correctly.
Worked Example
A contractor has $45,000 in annual overhead costs and $300,000 in annual revenue.
- 01Overhead rate = ($45,000 / $300,000) x 100 = 15%
- 02Revenue after overhead = $300,000 - $45,000 = $255,000
- 03Monthly overhead = $45,000 / 12 = $3,750
Frequently Asked Questions
What is a healthy overhead rate for contractors?
Most contractors operate with 10-25% overhead. Below 10% may indicate underinvestment in the business. Above 25% may signal inefficiency. Larger companies typically have higher overhead rates.
How do I reduce overhead?
Review insurance policies for better rates, negotiate with suppliers, reduce unnecessary subscriptions, optimize vehicle routes, and automate administrative tasks. Focus on the largest overhead categories first.
Ready to run the numbers?
Open Contractor Overhead Calculator