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Overhead per billable hour calculator
This is the number almost nobody calculates: what your business costs to keep the doors open, divided by the hours you can actually bill. Every quoted hour has to carry it before you earn anything.
Any job priced without that hourly figure inside it is being subsidised by the rest of your work.
Overhead is a cost of the hour, not a percentage of the job
The common shortcut is to add "10% for overhead" to a quote. It fails in both directions. On a material-heavy job — a $22,000 supply-and-install where your crew is on site two days — 10% collects far more overhead than those two days consumed. On a labour-heavy job with almost no materials, 10% collects nowhere near enough, which is why the small fiddly work that keeps you busiest is so often the work that pays worst.
Overhead accrues with time. A per-hour recovery matches how it's actually incurred.
What counts as overhead and what doesn't
The dividing line: if the cost would still exist next month with no jobs booked, it's overhead. Truck payment, insurance, phone, your quoting time — all overhead. Materials for a specific job, the disposal bin you rented for it, the labour hours on it — those are job costs and belong in the estimate directly.
The one people miss is their own unbilled time. Two evenings a week writing quotes and chasing invoices is about 35 hours a month. At $45 an hour that's $1,575 of real cost, and leaving it out doesn't make it free — it just means you work those hours for nothing.
The billable hours number matters as much as the costs
Halve your billable hours and your overhead per hour doubles. This is why a slow winter is dangerous in a way that isn't obvious: the truck payment doesn't drop, so each remaining hour has to carry more. If your work is seasonal, run this calculator on your realistic annual hours rather than your best month.
Next step: feed this figure and your loaded labour rate into the hourly rate calculator to get the number you should actually be charging.
Questions contractors actually ask
Is my own salary overhead?
Split it. Hours you spend on site are a labour cost on those jobs. Hours you spend quoting, invoicing, ordering and answering the phone are overhead. Owners who count neither end up working for free in the office and calling it a business.
What's a normal overhead per hour?
For a one- to three-person residential contractor, $12–25 an hour is the usual range. Under $10 usually means something has been left out of the list — most often unbilled office time or truck costs.
Do I add overhead to material costs too?
Handling materials does consume overhead: ordering, pickup, storage, returns. Most trades recover that with a markup on materials rather than an hourly charge, which is why the pricing calculator in the Vault treats the two separately.
How often should I redo this?
Once a year, and any time something structural changes — a new truck, a shop lease, a hire, or an insurance renewal that jumps.
Stop re-deriving this every January
The Vault's pricing calculator holds your overhead figure permanently and applies it to every job you price, so the hour you quote always carries its share.
Pricing calculator, 10 trade estimate templates in Word, pre-written exclusions and terms, and the 10-minute pricing guide. One payment, no subscription, 30-day guarantee.