Pricing & Margins

Bake your overhead into every quote.

Most owners price job by job using direct cost plus margin, then wonder in April why a “30% margin shop” turned in a 4% net profit year.

The trap

Direct cost plus margin forgets the building.

A 30% markup on crew, materials, and equipment looks healthy on the estimate. It pays for the job itself. It does not pay for the truck insurance, the office rent, the software stack, the marketing spend, or your salary.

Overhead does not show up on the estimate. It shows up at tax time, all at once, and eats the year.

Two ways to recover it

Pick a method. Apply it to every quote.

01
Percentage of revenue
Total annual overhead ÷ total annual revenue = your overhead burden percentage. Apply that percentage to the direct-cost subtotal of every estimate before adding margin.
02
Per labor hour burden
Total annual overhead ÷ total productive labor hours = dollars added per quoted labor hour. Cleaner for shops that bill by the hour or by the crew day.

The math

$250k overhead on $1M revenue. 25% burden.

A job with $1,000 of direct cost needs $250 of overhead added before you even think about profit. Quote it at $1,300 and you keep $50 to cover taxes and net profit. Quote it at $1,500 and you keep $250 of real profit.

Most owners skip the $250 step. They quote $1,200, feel good about the “20% margin,” and lose money on the job.

Overhead is not optional. If your pricing does not include it, your customers are not paying for it. You are.

The bottom line

Margin is what’s left after everything gets paid.

Direct cost. Overhead. Then margin. Quote in that order and the year ends differently.