Overhead and Profit on a $250,000 Job
Price the job at
$333,333.33
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, equipment250000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$333,333.33
| Direct job cost | $250,000.00 |
|---|---|
| Overhead recovered at 15% | $50,000.00 |
| Profit at 10% | $33,333.33 |
| Price | $333,333.33 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $312,500.00short by $20,833.33 |
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% | $312,500.00 | 25% | $300,000.00 |
| 15% | $333,333.33 | 33.3% | $312,500.00 |
| 20% | $357,142.86 | 42.9% | $325,000.00 |
| 25% | $384,615.38 | 53.8% | $337,500.00 |
What else matters here
A quarter million of direct cost prices at $333,333.33. Overhead recovery is $50,000 and profit is $33,333.33.
A job this size ties up most of a small contractor's capacity for months, which is the argument for checking the overhead percentage rather than accepting 15. If this one job is half your year, it has to carry half your overhead, and half of a $120,000 overhead is $60,000, not $50,000.
Cash flow on a contract this size is a separate problem from price. A good price paid 60 days late still closes a business, so the draw schedule and the retainage terms matter as much as these percentages do.
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 $250,000?
$333,333.33 with 15 percent overhead and 10 percent profit, a 33.3 percent markup on cost.
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.
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.