Overhead and Profit on a $300,000 Job
Price the job at
$400,000.00
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, equipment300000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$400,000.00
| Direct job cost | $300,000.00 |
|---|---|
| Overhead recovered at 15% | $60,000.00 |
| Profit at 10% | $40,000.00 |
| Price | $400,000.00 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $375,000.00short by $25,000.00 |
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% | $375,000.00 | 25% | $360,000.00 |
| 15% | $400,000.00 | 33.3% | $375,000.00 |
| 20% | $428,571.43 | 42.9% | $390,000.00 |
| 25% | $461,538.46 | 53.8% | $405,000.00 |
What else matters here
Three hundred thousand of cost prices at $400,000, with $60,000 of overhead recovered and $40,000 of profit.
Overhead is a time cost as much as a revenue cost. A business carrying $240,000 of overhead a year is spending $20,000 a month whether anything is being built or not, so a job priced on a six month schedule that runs to eight has absorbed two extra months of a company that was supposed to be somewhere else.
Forty thousand of profit does not survive that, and nothing in the contract recovers it unless the contract says so. Put a schedule in the agreement with a completion date, define what counts as an excusable delay and what a change order does to the date, and price extended general conditions for anything that pushes the job out. A delay caused by the owner is a cost event, and it is only billable if the paperwork treated it as one at the time.
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 $300,000?
$400,000 at 15 percent overhead and 10 percent profit, a 33.3 percent markup on cost.
How does a schedule overrun affect overhead?
Directly. Overhead runs by the month, so a six month job that takes eight absorbs two extra months of it. Put a completion date in the contract and price extended general conditions for owner caused delay.
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.