Overhead Rate Calculator

The numbers behind your pricing

Overhead is the cost of being in business, not the cost of doing a job. It's the insurance premium, the truck payment, the office, the accounting software, the phone bill — everything that exists whether you book one job or fifty. The problem is that overhead doesn't show up on any single estimate, so contractors routinely quote prices that cover materials and labor but quietly lose money on the overhead they forgot to allocate.

The fix is to convert overhead into a rate you can attach to every hour or every job. Divide annual overhead by annual billable hours and you get overhead per hour — the indirect cost every billable hour must recover. Divide annual overhead by annual revenue and you get the burden rate — the percentage of every dollar that goes to overhead. Either number can be built into your pricing so overhead is never an afterthought.

Once you know your overhead per hour, add it to your labor rate before applying markup. If labor costs you $30/hour and overhead is $25/hour, your true labor cost is $55/hour — and that's before profit. Quoting at $45/hour because 'that's what the market pays' means you're donating $10/hour of overhead to every customer. Either raise the rate, raise the markup, or cut the overhead.

The burden rate tells you whether your business model is viable at all. A healthy residential trade often runs overhead at 20–35% of revenue. If yours is pushing 45–50%, you're either underpricing, over-spending on overhead, or not billing enough billable hours — and no amount of marketing fixes a business that loses money on every job before it even scales.