Overhead Recovery Calculator

Add up a full year of costs that are not chargeable to any specific job or sale — everything that would still bill you if you took a month off. Then choose your recovery base. Per billable hour fits businesses that sell time (trades, consultants, agencies): dividing overhead by the hours you can actually bill — not hours worked; estimating, driving, and admin do not count — gives the dollars each billable hour must carry before wages and profit. Percent of revenue fits job- and product-pricing: it is the share of every sales dollar spoken for before direct costs and profit divide the rest.

Both forms plug directly into the pricing tools: the hourly figure adds to your burdened labor rate (see the Labor Burden Calculator), the percentage feeds the Break-Even Job Price and Break-Even Revenue calculators. Use one or the other in a given price — using both double-charges the customer and loses you bids.

Example 1 — small contracting company. Annual overhead $96,000 (office, two trucks, insurance, owner's management salary, advertising). Crew bills 3,200 hours/year. Overhead per billable hour = $96,000 ÷ 3,200 = $30/hour. On $480,000 revenue, overhead % = 20%. A crew hour whose burdened wage cost is $40 truly costs the company $70 before profit — quote $65/hour and the busier you get, the more you lose.

Example 2 — solo operator. Overhead $54,000 (vehicle, insurance, tools, phone, software, modest shop). Realistic billable hours: 1,500 (not 2,080 — estimating, supply runs, and admin are unbillable). Overhead per billable hour = $36/hour. This is why solo rates that look "high" are often just honest: $36 of every billed hour is spoken for before the operator earns a wage.

The per-hour figure is the toll every billable hour pays for the business to exist — collect it in your rate or pay it out of your profit; there is no third option. The percentage form says what fraction of every sales dollar is pre-committed. If the numbers shock you, look at both directions before cutting: the denominator matters as much as the numerator — more billable hours spread the same overhead thinner, which is why utilization is a profit lever equal to any expense cut.

• Overhead under 10% of revenue: very lean — verify nothing is hiding (unpaid owner management time is overhead someone is donating).
• 10–20% of revenue: the common range for small service businesses.
• 20–30%: not automatically wrong, but every bid must now consciously carry it; thin-margin work becomes unaffordable at this level.
• Above 30%: the business exists mostly to feed its own structure — either revenue must grow into the overhead or the overhead must come down.

Use this calculator:

• Annually, from your books — and again whenever a big fixed cost changes (new truck, new office, new hire in admin).
• Before setting hourly rates — rate = burdened labor + overhead per hour + profit; this supplies the middle term.
• Before bidding with a percentage — supply the overhead % to the Break-Even Job Price Calculator.
• When growth is on the table — adding capacity adds overhead first and revenue later; re-run with projected numbers to see the new recovery requirement.

• The billable-hours denominator is the most commonly flattered input — count last year's actual billed hours, not this year's hopes.
• Treats overhead as one pool; multi-crew or multi-line businesses may need overhead allocated by division.
• A trailing snapshot: growing businesses should also run projected numbers.
• Owner compensation split matters — management time is overhead, tool-belt time is direct labor; splitting it wrong distorts both this number and your labor burden.