What counts as overhead for a contractor?

Any cost of being in business that isn't tied to a specific job. Vehicle and fuel, tools, business insurance, software, phone, accounting fees, marketing, office space, and any continuing-education or licensing fees. Materials and labor for specific jobs are not overhead — they're cost of goods sold.

Why does overhead percentage matter?

Because if you charge a labor rate that doesn't include it, you're absorbing it personally — and the more you work, the more you absorb. A solo contractor with 30% overhead who charges a bare-bones $50/hour is actually netting $35/hour after overhead, not $50.

How do I include overhead in my labor rate?

Build it in. If your bare labor rate (what you want to earn) is $50/hour and your overhead is 30%, your billed labor rate should be roughly $65/hour. Don't list it as a separate line on the quote — that invites customers to negotiate it back out. Quote a clean overhead-loaded rate.

What's a typical overhead percentage for solo contractors?

Most run 20-40%. Newer contractors often calculate 15% and find out it's actually 30% when they include the costs they forgot (insurance, software, vehicle depreciation). Bigger operations with office staff and shop space can run 50%+ — the percentage doesn't make them less profitable, it just means their pricing needs to account for it.

Contractor Overhead Calculator

Monthly Business Expenses

Vehicle Costs

Payment, gas, maintenance, insurance

Business Insurance

Liability, workers comp, bonding

Tools & Equipment

Purchases, repairs, replacements (avg)

Software & Subscriptions

QuoteCat, accounting, etc.

Office & Storage

Shop, storage, or home office portion

Marketing

Ads, hosting, leads, business cards

Other Overhead

Callbacks, warranty work, misc

Monthly Revenue

Monthly Labor Revenue

How much you typically bill in labor per month (not materials)

Your Overhead Rate Is

22.9%

of every labor dollar billed

Total Monthly Overhead $2,150

Total Annual Overhead $25,800

Annual Labor Revenue $96,000

What This Number Means

For every dollar you bill in labor, this percentage gets eaten by overhead before you take home anything. Most contractors who haven't run these numbers are shocked — overhead often runs 20–35% of labor revenue.

Use this in pricing: Your labor rate has to cover overhead AND your take-home AND profit margin. If you're not loading overhead into your rate, you're paying for vehicle, insurance, and tools out of your own pocket.

The overhead nobody adds back

Overhead is the cost of being in business before you do any work. Truck payment, fuel, tools, business insurance, software, phone, accounting, marketing — whatever you'd still pay if you took a month off. For a solo contractor, it usually adds up to more than expected. 20% is optimistic. 30% is common. 40%+ isn't unusual once you include vehicle depreciation and the things you forgot.

The problem is that most contractors set their hourly rate by looking at what others charge, not by building up from their own overhead. So they quietly absorb it. If your "bare" hourly rate is $50 and your overhead is 30%, you're really earning $35/hour — the difference is the overhead you didn't price for.

How to use this calculator

Monthly business expenses — total your real overhead. Include everything you'd pay during a month with zero jobs.

Monthly labor revenue — the portion of revenue that's your time, not materials marked up.

Overhead % — the calculator divides expenses by labor revenue. This is the percentage you need to add to your labor rate just to break even on overhead.

Need to turn that overhead percentage into a real hourly rate? Use the Labor Rate Calculator next. Want the whole pricing method? Contractor Pricing Guide ($29, free with Pro/Premium).

Overhead Calculator

See your real margin on every quote

The overhead nobody adds back

How to use this calculator