Business Overhead Calculator
Work out your monthly business overhead and the amount to allocate to each billable hour or job. Then optionally add direct job costs and a target profit margin or markup to calculate a selling price.
How to calculate business overhead
Add expenses that support the business and are not directly assigned to a specific job. Convert them to a consistent period before totaling them. This calculator uses monthly averages and shows an annual projection at twelve times that monthly amount.
Annual overhead projection = monthly overhead × 12
Overhead per billable hour = monthly overhead ÷ monthly billable worker-hours
Overhead per job = monthly overhead ÷ monthly completed jobs
Overhead as a share of revenue = monthly overhead ÷ monthly revenue × 100
A yearly insurance bill is spread over twelve months for this estimate. That makes expenses comparable, but it does not mean the bill is paid monthly. Keep a separate cash-flow schedule for payment dates and one-off purchases.
Separate direct costs from overhead
Materials used on a specific job and labor directly assigned to that job normally belong in its direct cost estimate. Shared office expenses or administrative work may belong in overhead. Classify costs consistently and do not enter the same expense in both places.
If an expense contains both business-wide and job-specific amounts, allocate the relevant share before entering it. This calculator does not determine accounting classifications, tax deductions, or how capital purchases should be treated.
Example: $3,000 monthly overhead
The starting expenses total $3,000 per month after converting $1,200 annual insurance to $100 per month. At the same expense level, the annual projection is $36,000.
| Measure | Calculation | Result |
|---|---|---|
| Overhead per billable hour | $3,000 ÷ 120 hours | $25 |
| Overhead per equal-sized job | $3,000 ÷ 20 jobs | $150 |
| Overhead share of revenue | $3,000 ÷ $15,000 × 100 | 20% |
| Overhead allocated to a 4-hour job | 4 × $25 | $100 |
| Included job cost | $400 direct costs + $100 overhead | $500 |
| Price at a 20% target margin | $500 ÷ (1 − 0.20) | $625 |
| Amount above included costs | $625 − $500 | $125 |
The hourly and per-job allocations are alternatives. The example job uses $100 of hourly overhead, not $100 plus a $150 per-job share. Enable job pricing to reproduce the $625 result.
Choose an overhead allocation that fits your work
Hourly allocation spreads expenses over the billable worker-hours entered for the month. Include all workers within the same cost scope. Two workers each providing 60 billable hours represent 120 billable worker-hours, not 60 hours.
Per-job allocation gives each job an equal share. It is easier to interpret when jobs make similar demands on the business. A small repair and a large installation may need different allocations, so an hour-based or manually calculated amount may fit better.
The tool distributes the full monthly overhead across the entered capacity. If actual billable hours or jobs fall short, applying that rate to fewer jobs may recover less overhead than planned. Review capacity assumptions as well as expenses.
Overhead divided by revenue is a reporting ratio. It is not automatically a markup to apply to direct job costs. Keep the allocation method and the sales comparison separate.
Calculate a job price with overhead and profit
Add direct job costs and one overhead allocation, then choose a target margin or a markup. This combines overhead planning and optional selling-price calculation on one page.
Price using target margin = included cost ÷ (1 − margin ÷ 100)
Price using markup = included cost × (1 + markup ÷ 100)
Amount above included costs = price − included cost
A 20% margin is not a 20% markup
On $500 of included costs, a 20% margin requires a $625 selling price. A 20% markup gives a $600 selling price, with $100 above costs and a 16.67% margin. A 25% markup produces the same $625 price as a 20% margin.
Here, the margin is measured after the entered costs and selected overhead allocation. It is not automatically the accounting gross margin or the company’s final net profit. Taxes, financing costs, or other expenses omitted from the inputs can change the final outcome.
Avoid adding overhead twice
If an hourly cost or subcontractor figure already includes the overhead you are recovering, account for that before adding another allocation. Choose “Already included” when the complete intended overhead is already inside the entered cost base. That option adds zero further overhead.
Manual allocation replaces the hourly or per-job calculation. It does not stack another overhead charge on top of either. Review the included-cost breakdown before using the selling price in a quote.
Business overhead calculator FAQs
What is business overhead?
For this tool, overhead means indirect operating expenses supporting the business rather than costs assigned directly to a particular job. Examples can include workspace, general insurance, subscriptions, and administrative expenses.
Can I enter annual and quarterly bills?
Yes. Each expense has its own period selector. Annual amounts are divided by twelve and quarterly amounts by three to produce monthly averages.
Does the annual total predict actual cash payments?
No. It is twelve times the normalized monthly overhead. It does not forecast payment dates, seasonal changes, or future cost increases.
Should direct employee wages go in overhead?
If the wages are directly assigned to a job, include them in direct job costs instead. Administrative or other indirect labor may belong in overhead. Do not include the same cost in both places.
Which hours should I enter?
Use the combined monthly billable worker-hours for the business scope represented by the expenses. Use the same definition when entering job hours. Do not substitute total paid hours without considering unbillable time.
What happens with zero billable hours or zero jobs?
The corresponding allocation rate is shown as unavailable. You can still see overhead totals. If job pricing selects that unavailable allocation, enter a positive allocation basis or choose another method.
Is overhead as a percentage of revenue a markup?
No. It divides overhead by revenue. A markup uses a cost base, so the two percentages are not interchangeable.
Can I calculate overhead and profit for a job?
Yes. Enable the job-pricing section, enter direct costs, select one overhead allocation, and choose margin or markup. The tool shows the included cost, selling price, and amount above those costs.
Can I enter a 100% target margin?
No. A 100% target margin makes the price formula divide by zero when costs are positive. The margin input is limited to less than 100%. Markup uses a different formula and may exceed 100%.
What if overhead is already included in my cost?
Choose Already included in the entered cost base. The calculator adds no further overhead. Keep the full intended cost in the cost-base field.
Does the result include tax or guarantee profit?
No. It is a pricing calculation based on entered costs and assumptions. Taxes and omitted expenses are not automatically included, and actual results can differ from the estimate.
Can I copy or print the estimate?
Yes. Use the result buttons. If clipboard access is unavailable, a text summary opens for manual copying. The summary contains internal business costs. Entries are not saved after reload.
Methodology and references
CalculatorForWork normalizes your expenses and applies the formulas shown above. Calculations use unrounded values before display formatting. All capacity, revenue, costs, and profit targets come from your inputs.
For background, see QuickBooks on overhead costs and AccountingCoach on margin and markup. This calculator’s job margin uses its stated included-cost base rather than assigning a financial-statement classification.