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Overhead

Overhead is the cost of running the company that no single job pays for directly. Examples are office rent, office staff and insurance.

Every job must carry a share of overhead, or the company loses money even on jobs that look profitable.

Example: an estimator's salary, the office lease, accounting software and company vehicles are overhead for a specialty contractor.

Work out your overhead from your own books for the past year. Compare it to your direct costs or revenue to get a recovery rate. Apply that rate in every estimate, before profit. Review it each year, because it changes as the company grows or shrinks.

See also

Run a real bid packet through it.