Overhead and Profit on a $125,000 Job
Price the job at
$166,666.67
15% overhead and 10% profit, both taken out of the price rather than added to the cost.
How that number is worked out
These are the figures this page was built with and every line the calculator produces from them. Change anything above and all of it moves.
- Direct job cost: material, labor, subs, equipment125000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$166,666.67
| Direct job cost | $125,000.00 |
|---|---|
| Overhead recovered at 15% | $25,000.00 |
| Profit at 10% | $16,666.67 |
| Price | $166,666.67 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $156,250.00short by $10,416.67 |
Overhead rate compared
Profit is held at 10 percent and only the overhead rate moves, so the last column shows what the wrong method would have charged at each level.
| Overhead rate | Price the job at | Markup this equals | If you had added the percent to cost instead |
|---|---|---|---|
| 10% | $156,250.00 | 25% | $150,000.00 |
| 15% | $166,666.67 | 33.3% | $156,250.00 |
| 20% | $178,571.43 | 42.9% | $162,500.00 |
| 25% | $192,307.69 | 53.8% | $168,750.00 |
What else matters here
A $125,000 cost prices at $166,666.67, with $25,000 of overhead recovered and $16,666.67 of profit.
When a bid has to come in under the calculated price, the profit line is the first thing people move and the last thing they should. Drop profit to five percent and the price falls to $156,250, a 25 percent markup, and the job still has to be run perfectly to deliver $7,812.50.
At five percent, one job that goes ten percent over cost erases the profit on four that went right. The lever that actually works is cost: a different assembly, a shorter schedule, a sub who is cheaper for a real reason, scope taken out with the customer's agreement. If none of those exist, the bid is not a bid you can win, and the cheapest thing a contractor can do is find that out before signing rather than after.
What this calculator assumes
- The classic 10 and 10 is overhead 10 percent and profit 10 percent. Almost nobody's overhead is actually 10 percent, so work out your own: last year's overhead divided by last year's revenue.
- Both numbers here are treated as margins, taken out of the price, not markups added to cost. That is the conservative reading and it is the one that leaves you whole.
- The wrong way, adding 25 percent to cost and calling it 25 percent O and P, leaves you 5 percentage points short on a $24,000 job. The comparison is below.
Questions people ask
What should I charge for a job that costs me $125,000?
$166,666.67 at 15 percent overhead and 10 percent profit, a 33.3 percent markup on cost.
Should I cut my profit to win a bid?
It is the wrong lever. At 5 percent profit this job earns $7,812.50 and one ten percent overrun erases the profit on four good jobs. Cut cost or cut scope, and decline the ones where neither is possible.
Why not just add the percentage to the cost?
Because a percentage added to cost comes back out of the price as a smaller percentage. Adding 25 percent to a $50,000 cost gives $62,500, and 25 percent of that price is $15,625, not the $12,500 you added. The calculator treats both figures as margins taken out of the price, which is the reading that leaves you whole.
The overhead and profit calculator takes any dimensions you like and hands back the same list.