Job Costing 9 min read BUILT FOR CONTRACTORS

Remodeling Contractor Overhead Percentage: What It Is and How to Calculate Yours

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Most remodeling contractors undercharge for overhead — not because they're unaware it exists, but because they've never calculated what it actually costs them to run the business. The result is predictable: healthy-looking revenue, disappointing profit.

⚡ Overhead Percentages — The Quick Version

✓ Overhead is every cost of running your business that isn't a direct job cost
✓ Typical remodeling contractor overhead runs 15–25% of revenue
✓ Overhead % should be calculated from your actual books, not industry averages
✓ The formula: Overhead Rate = Total Overhead Costs ÷ Total Direct Job Costs
✓ Under-recovering overhead is the #1 reason profitable-looking remodelers can't explain where money went

The contractors who consistently hit 15–20% net profit margins aren’t necessarily winning bigger jobs or charging higher prices — they’re the ones who know exactly what it costs to run their business and price accordingly. Calculating your actual overhead rate takes about an hour with your P&L. That hour is worth more than almost any other investment you can make in your business this year.

Sources & Further Reading

Written by RemodelFin Editorial Team

RemodelFin's editorial team is comprised of former project managers, estimators, and business owners who have collectively managed over $50M in residential remodeling volume across the US.

RemodelFin Editorial · Pro Trade Content

Contractor Q&A

What is overhead for a remodeling contractor?

Overhead includes all costs of running your business that are not directly tied to a specific job. Examples: office rent, office staff salaries, vehicle costs not allocated to jobs, software subscriptions, marketing, insurance (non-WC portions), accounting fees, and owner salary not tied to field work. These costs exist whether you win a job or not.

What is a typical overhead percentage for a remodeling contractor?

Most residential remodeling contractors carry overhead of 15–25% of revenue, or 18–33% of direct job costs. Solo operators with minimal overhead may run 10–15% of revenue. Larger firms with project managers, estimators, and dedicated office staff commonly run 22–28% of revenue. The 'right' number is your actual number — not an industry benchmark.

How do I calculate my overhead percentage?

Pull your P&L for the last 12 months. List every line item that is not a direct job cost (materials, sub invoices, direct field labor). Sum those costs — that is your annual overhead. Divide by your total direct job costs to get your overhead-on-cost rate, or divide by revenue to get your overhead-on-revenue rate. Use whichever aligns with how you build estimates.

Should I apply overhead as a percentage of job cost or revenue?

Both are valid methods, but applying overhead as a percentage of direct job cost (materials + labor + subs) is the more common and technically accurate approach for remodeling contractors. Markup-based estimating (applying a percentage to costs to cover overhead and profit) is the industry standard. Just ensure you're consistent — don't mix the two methods.

What is the difference between overhead and profit in contractor estimates?

Overhead covers the cost of running your business (non-direct costs). Profit is what remains after all costs — direct AND overhead — are covered. On a $50,000 job with $32,000 in direct costs and $8,000 in allocated overhead (25% of direct costs), gross profit is $10,000 — a 20% profit margin on revenue. These are separate and both belong in every estimate.

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