Overhead and Profit on a $5,000 Job
Price the job at
$6,666.67
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, equipment5000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$6,666.67
| Direct job cost | $5,000.00 |
|---|---|
| Overhead recovered at 15% | $1,000.00 |
| Profit at 10% | $666.67 |
| Price | $6,666.67 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $6,250.00short by $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% | $6,250.00 | 25% | $6,000.00 |
| 15% | $6,666.67 | 33.3% | $6,250.00 |
| 20% | $7,142.86 | 42.9% | $6,500.00 |
| 25% | $7,692.31 | 53.8% | $6,750.00 |
What else matters here
Five thousand of cost prices at $6,666.67. Overhead recovery is $1,000 and profit is $666.67.
The useful habit this page teaches is keeping the two halves apart. The estimate is a prediction: what this job will consume in material, labor, subs and fees, and it is either accurate or it is not. The price is a decision: what the business needs to charge to stay a business. Estimating is a skill and pricing is a policy, and contractors who do them in one step tend to get both wrong at once.
Keeping them separate is also what lets you answer a customer honestly. You can explain that a price includes overhead and profit without ever revealing your cost, and you can walk away from a job because the price does not work rather than because you have a feeling about it. At 25 percent overhead and 15 percent profit, the same $5,000 prices at $8,333.33, which is a 66.7 percent markup.
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 $5,000?
$6,666.67 at 15 percent overhead and 10 percent profit, a 33.3 percent markup on cost.
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.
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.