Overhead and Profit on a $30,000 Job
Price the job at
$40,000.00
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, equipment30000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$40,000.00
| Direct job cost | $30,000.00 |
|---|---|
| Overhead recovered at 15% | $6,000.00 |
| Profit at 10% | $4,000.00 |
| Price | $40,000.00 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $37,500.00short by $2,500.00 |
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% | $37,500.00 | 25% | $36,000.00 |
| 15% | $40,000.00 | 33.3% | $37,500.00 |
| 20% | $42,857.14 | 42.9% | $39,000.00 |
| 25% | $46,153.85 | 53.8% | $40,500.00 |
What else matters here
Thirty thousand of cost prices at $40,000, recovering $6,000 of overhead and earning $4,000 of profit.
Now look at what a discount does to that. Ten percent off $40,000 is $4,000, and the profit on the job is $4,000. The whole profit is gone and every other number on the page is unchanged: the same material, the same weeks, the same risk, the same warranty, for nothing.
A five percent discount is half the profit. That is the honest way to think about the conversation in a driveway when someone asks for a better number: you are not giving away five or ten percent, you are giving away half or all of what the job earns. If the price has to move, move the scope with it, and say which part is coming out.
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 $30,000?
$40,000 at 15 percent overhead and 10 percent profit, a 33.3 percent markup on cost.
What does a 10 percent discount really cost me?
On this job, everything. Ten percent off $40,000 is $4,000 and the profit is $4,000, so the discount is the entire profit. Five percent is half of it. Move the scope instead of the price.
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.