Contractor Overhead Percentage Calculator

For a solo trade contractor, a healthy operating overhead typically runs 15–25% of annual revenue. The CFMA's 2024 Construction Financial Benchmarker found that best-in-class companies operate at around 10.8% overhead — but these are larger, highly efficient operations. Solo operators carrying a vehicle, insurance, tools, and marketing typically land between 18–28%. Roofers are an outlier: workers comp alone (NCCI class 5552) can run $20–$40 per $100 of payroll, pushing overhead to 28–45% of revenue.

Overhead percentage = (Total Annual Overhead ÷ Annual Revenue) × 100. For example: if your annual overhead is $28,000 and your annual revenue is $160,000, your overhead rate is $28,000 ÷ $160,000 = 17.5%. This excludes direct job costs (materials, subcontractors, direct labor on specific jobs) — only count operating costs that exist regardless of whether you are on a job: vehicle, insurance, tools, marketing, software, and accounting. Owner pay is also excluded from operating overhead; it is accounted for separately as income in the hourly rate formula.

Required Gross Margin = Overhead % + Target Net Profit %. Once you know your required gross margin, Required Markup on Cost = Gross Margin ÷ (1 − Gross Margin). Example: a contractor with 22% overhead wanting 10% net profit needs a 32% gross margin, which means marking up all direct job costs by 32 ÷ 0.68 = 47%. This is the key formula — it directly converts your overhead into a pricing number you can apply to every job. Charging less means you are paying overhead out of your own pocket.

The "10 & 10 rule" — add 10% overhead and 10% profit to job costs — was a rough heuristic from an era when solo contractors had minimal overhead. In 2026, it severely underprice most operations. At 10% overhead + 10% profit = 20% gross margin, you would be charging a 25% markup on costs. But if your actual overhead is 22% of revenue and you want 10% net profit, you need a 47% markup. Using 10 & 10 when your real overhead is 22% means you are paying 12 cents of every dollar in revenue out of your own pocket. Always calculate from your actual numbers.

Workers comp rates are set by NCCI class codes and vary dramatically by trade. Electricians (NCCI 5190) average about $2.63 per $100 of payroll — the lowest of any common trade. Plumbers (5183) run about $3.05. HVAC techs (5537) around $3.14. Painters (5474) around $5.57. Carpenters doing residential framing (5645) can run $21/$100. Roofers (5552) are the most expensive at $20–$40/$100, because roofing accounts for 26% of all construction fall fatalities according to the BLS. A roofer with $60,000 in payroll could pay $12,000–$24,000 per year in workers comp alone.

The nine key categories are: (1) shop/storage/office rent — enter $0 if you work from home/truck; (2) vehicle (payment, fuel, maintenance, commercial auto insurance — typically $10k–$15k/year total); (3) general liability insurance ($750–$2,500/year depending on trade); (4) workers comp if you have employees; (5) tools and equipment — annual replacement cost plus depreciation on major equipment; (6) marketing (website, lead services, Google Ads, vehicle wraps); (7) software, phone, and internet (FSM software like Jobber or Housecall Pro, QuickBooks, cell phone plan); (8) accounting and legal (CPA, tax prep, business license renewals, permit fees); (9) everything else — uniforms, continuing education, dues and subscriptions.

Overhead percentage tells you the minimum gross margin you need to break even on overhead. Once you know your overhead %, calculate: Required Gross Margin = Overhead % + Target Profit %. Then for any job: Job Revenue = Direct Costs ÷ (1 − Gross Margin). Example: a job with $5,000 in direct costs, with 22% overhead and 10% target profit (32% gross margin required): Job Revenue = $5,000 ÷ (1 − 0.32) = $5,000 ÷ 0.68 = $7,353. The "cost plus markup" shortcut is: Markup = Gross Margin ÷ (1 − Gross Margin) = 0.32 ÷ 0.68 = 47%. So $5,000 × 1.47 = $7,350. Both methods give the same answer.

Direct job costs (also called cost of goods sold or COGS in construction) are expenses tied to a specific job: materials, subcontractors, and hourly field labor for that project. These vary directly with revenue. Overhead costs exist regardless of whether you are on a job: your truck payment is the same whether you billed 40 hours this week or 0. The distinction matters because overhead must be recovered through your gross margin, while job costs are recovered dollar-for-dollar in your bid. Double-counting overhead as both a line-item in your bid and as a percentage markup is a common pricing mistake that overestimates job profitability.