Overhead and Profit on a $200,000 Job
Price the job at
$266,666.67
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, equipment200000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$266,666.67
| Direct job cost | $200,000.00 |
|---|---|
| Overhead recovered at 15% | $40,000.00 |
| Profit at 10% | $26,666.67 |
| Price | $266,666.67 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $250,000.00short by $16,666.67 |
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% | $250,000.00 | 25% | $240,000.00 |
| 15% | $266,666.67 | 33.3% | $250,000.00 |
| 20% | $285,714.29 | 42.9% | $260,000.00 |
| 25% | $307,692.31 | 53.8% | $270,000.00 |
What else matters here
Two hundred thousand of cost prices at $266,666.67. Overhead recovery is $40,000 and profit is $26,666.67.
Overhead is a dollar amount first and a percentage second, and the percentage is only true for one level of revenue. A business with $120,000 of overhead doing $800,000 of work is carrying 15 percent. The same business doing $1.6 million, if overhead only grows to $190,000, is carrying under 12, and at 12 percent this job prices at $256,410 instead.
Recalculate it every year against the year you are actually in rather than the one that just ended. Growing businesses get this wrong in both directions: they keep charging last year's higher percentage and lose bids they should win, or they assume overhead stayed flat while they added a truck, a foreman and a bookkeeper, and quietly stop recovering it.
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 $200,000?
$266,666.67 at 15 percent overhead and 10 percent profit, a 33.3 percent markup on cost.
Does my overhead percentage change as I grow?
Yes, because overhead is a dollar amount and the percentage depends on revenue. At 12 percent this job prices at $256,410 rather than $266,667, so recalculate against the year you are in, not the one that ended.
How do I work out my real overhead percentage?
Last year's overhead divided by last year's revenue. Overhead is everything that is not job cost: insurance, the truck, the phone, software, the accountant, advertising, your office time. Almost nobody's overhead is the 10 percent in the old rule of thumb.
The overhead and profit calculator takes any dimensions you like and hands back the same list.