How to Work Out an Overhead Rate for a Small Electrical Shop

If your prices only cover material and labor, the truck, insurance and phone bill come out of your profit. Here is a simple way to build overhead into every bid.

What counts as overhead

Overhead is what it costs to run the business that isn't tied to one job: truck payments, fuel, insurance, licenses and renewals, tools, phone, software, office rent, accounting and advertising.

Step 1: add up a year of overhead

Item (example)	Per year
Truck payment, fuel and maintenance	$14,000
Insurance	$6,000
Tools and replacement	$3,000
Phone, software and internet	$2,400
Licenses, fees and continuing education	$1,200
Accounting and office	$3,400
Total overhead	$30,000

These are example numbers, not benchmarks. Pull yours from last year's bank and card statements.

Step 2: add up a year of direct job cost

Direct cost is material plus field labor you put on jobs. Say that was $200,000 last year.

Step 3: divide

Overhead % = yearly overhead ÷ yearly direct cost
$30,000 ÷ $200,000 = 15%

On every job, add 15% to direct cost before you add profit. A job with $2,000 of material and labor has a break-even cost of $2,300.

Step 4: then add profit

With a 20% target margin: $2,300 ÷ (1 − 0.20) = $2,875. Your profit of $575 is real profit, after the truck and insurance are paid. See margin vs. markup for why we divide.

Set a minimum job charge

Small jobs still cost a trip, a parking spot and an hour of the day. Pick a minimum that covers your drive time plus overhead and set it once, so a $90 receptacle swap doesn't quietly lose money.

Review it twice a year

Overhead changes when you add a truck, a helper or a new insurance policy. Re-run the math every six months, or any time a big fixed cost changes.

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This article is general business math for electrical contractors. It is not legal, tax, accounting or code advice. Use your own numbers.