Overhead & Profit Calculator

How the overhead and profit calculator works

This calculator starts with direct job costs: materials, labor, subcontractors, equipment and other direct costs. It then adds the overhead allocation for the job to get total cost. From there it can either calculate the price needed for a target profit or check the profit in an existing bid.

Already know the project revenue and want to analyze the actual profitability of a completed or ongoing project? Use the Project Profitability Calculator.

Profit margin vs markup

Profit margin is profit divided by selling price. Markup is profit divided by cost. They are related, but they are not the same.

For example, if cost is $8,000 and price is $10,000, profit is $2,000. Margin is $2,000 divided by $10,000, or 20%. Markup is $2,000 divided by $8,000, or 25%.

For simpler margin and markup conversions, use the Freelance Profit Margin Calculator.

What counts as contractor overhead?

Overhead is business cost that is not tied to only one line item on a job. Examples can include insurance, office/admin work, vehicles, software, licenses, tools and other non-billable business expenses. This calculator lets you allocate overhead as a percentage of direct job cost or as a fixed dollar amount.

How to price a job for a target profit margin

When you price by target margin, required price equals total cost divided by one minus the target margin. For example, $8,000 of total cost with a 20% target margin requires a $10,000 price.

Worked example

A job with $4,000 of materials, $2,500 of labor, $1,000 of subcontractors, $300 of equipment and $200 of other direct costs has $8,000 of direct cost. With $800 of overhead and a 20% target margin, total cost is $8,800 and the price to charge is $11,000.

If actual hours or costs run past the estimate, the Project Overrun Calculator can show how the extra work affects the job.

FAQ

What is overhead and profit?

Overhead is the share of business cost assigned to the job. Profit is what remains after direct costs and overhead are covered.

What is the difference between profit margin and markup?

Margin is profit divided by selling price. Markup is profit divided by cost. A 25% markup produces a 20% margin when cost is $8,000 and price is $10,000.

How do I calculate overhead on a job?

You can allocate overhead as a percentage of direct job cost or enter a fixed amount for this job. This tool does not calculate annual company overhead.

How do I calculate a selling price from a target margin?

Add direct cost and overhead to get total cost, then divide total cost by one minus the target margin.

Can profit margin be negative?

Yes. In Check a Bid mode, margin is negative when the quoted price is below total cost.

Should labor be included before overhead?

Yes. Labor is part of direct job cost in this calculator, so overhead is added after materials, labor, subcontractors, equipment and other direct costs.