Overhead and Profit on an $80,000 Job
Price the job at
$106,666.67
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, equipment80000 $
- Overhead recovery15 %
- Profit you want to keep10 %
Price the job at$106,666.67
| Direct job cost | $80,000.00 |
|---|---|
| Overhead recovered at 15% | $16,000.00 |
| Profit at 10% | $10,666.67 |
| Price | $106,666.67 |
| Markup this equals | 33.3% |
| If you had added the percent to cost instead | $100,000.00short by $6,666.67 |
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% | $100,000.00 | 25% | $96,000.00 |
| 15% | $106,666.67 | 33.3% | $100,000.00 |
| 20% | $114,285.71 | 42.9% | $104,000.00 |
| 25% | $123,076.92 | 53.8% | $108,000.00 |
What else matters here
Eighty thousand of cost prices at $106,666.67, recovering $16,000 of overhead and earning $10,666.67 of profit.
There is a second round anchor hiding in this one. At 10 percent overhead and 10 percent profit, $80,000 of cost prices at exactly $100,000, a 25 percent markup, and that is the number most people have in their head when they say a contractor adds twenty five percent.
The catch is the ten percent. Overhead at ten percent describes a business with almost no overhead: no shop, no yard, no office help, no service vehicle beyond the one truck, no advertising to speak of. Most residential contractors who run the number honestly land between fifteen and thirty. The twenty five percent markup is not wrong, it is the answer to a question about somebody else's business.
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 $80,000?
$106,666.67 at 15 percent overhead and 10 percent profit. At 10 percent overhead it would be exactly $100,000, which is a 25 percent markup.
Is a 25 percent markup enough?
Only if your overhead really is 10 percent, which describes a business with no shop, no office help and almost no advertising. Most residential contractors run between 15 and 30.
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.