Contractor Business Guide
What Is the Typical Contractor Overhead Percentage?
Contractor overhead typically ranges from 25% to 54% of revenue depending on company size, trade, and geographic location. Understanding your overhead rate is essential for profitable pricing.
TL;DR — Contractor Overhead
Most contractors have 25-45% overhead. Small contractors: 25-35%. Mid-size: 35-45%. Large companies: 40-54%. The problem: Most contractors don’t track real overhead—they guess. Quote Smarter. Close Faster. Keep More. BuildFolio tracks your actual overhead and profit on every job, unlike Jobber or ServiceTitan.
Enter your expenses into our free calculator and compare to your trade benchmark.
Overhead Percentage by Company Size
Overhead tends to increase with company size as more infrastructure, staff, and systems are needed to support operations:
| Company Size | Annual Revenue | Typical Overhead |
|---|---|---|
| Solo operator | Under $250K | 25-35% |
| Small crew (2-5) | $250K-$750K | 30-40% |
| Mid-size (6-20) | $750K-$2M | 35-45% |
| Established (20-50) | $2M-$10M | 40-50% |
| Large (50+) | $10M+ | 45-54% |
Solo Operators: Count Your Time
Many solo contractors show lower overhead because they do not pay themselves a salary for administrative work. If you spend 15+ hours per week on estimating, billing, and admin, that time has value and should be included in your overhead calculation.
Overhead Percentage by Trade
Different trades have different cost structures. Workers comp rates, equipment needs, and licensing requirements all affect overhead:
| Trade | Typical Overhead | Key Drivers |
|---|---|---|
| Roofing | 30-45% | High workers comp, equipment |
| HVAC | 35-50% | Vehicles, inventory, licensing |
| Plumbing | 30-45% | Vehicles, equipment, licensing |
| Electrical | 28-42% | Licensing, continuing education |
| Remodeling | 35-50% | Showroom, design staff |
| Painting | 25-38% | Lower equipment costs |
| Landscaping | 30-45% | Equipment, seasonal labor |
| General Contractor | 35-50% | Office staff, project management |
What’s Included in Overhead?
Overhead includes all business expenses not directly tied to specific jobs:
- Insurance: General liability, workers comp, vehicle, professional liability
- Vehicles: Payments, fuel, maintenance, registration
- Facilities: Shop rent, utilities, storage
- Administrative: Office staff, accounting, legal, software
- Marketing: Advertising, website, lead generation
- Equipment: Tools, depreciation, replacement
- Owner salary: For management and admin work
How to Calculate Your Overhead Rate
Follow this simple process:
- Total annual overhead expenses: Add up all non-job-specific costs for the year
- Total annual revenue: Sum all revenue from completed jobs
- Divide: Overhead ÷ Revenue × 100 = Overhead Percentage
Example: $180,000 overhead ÷ $600,000 revenue = 30% overhead rate
Review Quarterly
Overhead costs change throughout the year. Review your overhead calculation quarterly and adjust pricing if your rate has increased significantly. Pro Tip: BuildFolio calculates this automatically by tracking costs on every job—you’ll see your true overhead without spreadsheets.
Using Your Overhead Rate in Pricing
Once you know your overhead percentage, apply it to every job estimate:
- Calculate direct costs (materials + labor)
- Add overhead allocation (direct costs × overhead %)
- Add profit margin
- This equals your selling price
Example: $10,000 direct costs + $3,500 overhead (35%) + $2,700 profit (20% margin) = $16,200 price
See Your Real Margins vs Industry Benchmark
Most contractors guess their margins. Use this interactive tool to see how your margins compare to the industry benchmark—and how much you might be leaving on the table:
See How BuildFolio Tracks Profit on Real Jobs
Watch a 30-second demo of our Living Estimate—the same tool that helped Tom from Summit Roofing discover he was making 28% margin, not the 18% he thought.
View Live Demo Estimate →Frequently Asked Questions
What is a good overhead percentage for contractors?
A good overhead percentage depends on your trade and company size. Most successful contractors maintain 25-45% overhead. Solo operators typically run 25-35%, while established companies with office staff and multiple crews often have 40-50% overhead. The key is knowing your actual number—not guessing.
How do I reduce my contractor overhead?
Focus on the biggest expense categories first: shop annual vehicle costs, insurance rates, and software subscriptions. Consider sharing shop space, shopping insurance annually, and consolidating software tools. However, don’t cut overhead that generates revenue (like marketing) or protects you (like insurance).
Should I include owner salary in overhead?
Yes. If you spend time on administrative work (estimating, billing, scheduling, marketing), that time has value. A common mistake is excluding owner salary, which makes overhead look artificially low and leads to underpriced jobs. Pay yourself a reasonable wage for admin work and include it in overhead.
How often should I recalculate overhead?
Review your overhead quarterly and recalculate annually at minimum. Insurance renewals, vehicle purchases, and staff changes all affect your overhead rate. If you use software like BuildFolio, overhead is tracked automatically on every job so you always know your real numbers.
What’s the difference between overhead and profit?
Overhead covers business expenses not tied to specific jobs (insurance, vehicles, rent, admin). Profit is what’s left after covering direct costs AND overhead. Many contractors confuse the two, thinking their markup is profit when much of it actually goes to overhead. Track both separately.
Stop Guessing Your Margins
Most contractors think they know their margins. BuildFolio tracks your actual overhead and profit on every job—unlike Jobber or ServiceTitan. Get your free Profit Score in 2 minutes.
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