The Precision Guide™ to Understanding Business Overhead
Business overhead is the cost of operating your business whether or not you're on a job. Understanding and recovering overhead is essential for profitable pricing.
What Is Business Overhead?
Overhead includes the expenses required to keep your business running that cannot be assigned directly to one customer. If these costs are not included in your pricing, every completed job slowly weakens your business.
The Precision Framework™
List Fixed Costs
Insurance, rent, software, phones, bookkeeping and subscriptions.
List Operating Costs
Fuel, vehicle maintenance, advertising, uniforms, office supplies and utilities.
Calculate Annual Total
Add every overhead expense for the year.
Recover Through Billable Hours
Divide annual overhead by realistic annual billable hours.
Common Overhead Categories
Business Administration
Accounting, software, office expenses, licensing, banking, internet and phones.
Vehicles & Equipment
Payments, repairs, insurance, fuel, depreciation and replacement planning.
Marketing
Website, Google Business Profile, advertising, printing and branding.
Insurance
General liability, commercial auto, workers' compensation and umbrella coverage.
Facilities
Rent, utilities, storage, security and maintenance.
Professional Services
Legal, accounting, payroll and consulting.
Common Mistakes
Ignoring Small Expenses
Small recurring costs add up quickly.
Charging Competitor Prices
Their overhead is not your overhead.
Using Total Hours
Recover overhead using billable hours, not hours worked.
Leaving Out Profit
Overhead recovery alone does not create a healthy business.