What is the Real Overhead of Your Business?

There are many aspects of the cost of doing business. One aspect that business owners often don't understand is overhead.
What is the Real Overhead of Your Business? - Articles
What is the Real Overhead of Your Business?

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Overhead is all of the costs within a company that cannot be directly related to an individual job. All businesses have overhead. Who is paying your company's overhead? Are you? Or is your customer?

What contributes to overhead?

Here are some of the overhead items discussed in the Estimating and Bidding class:

  • office utility bills
  • office contents
  • office staff
  • professional services
  • advertising
  • bad debt
  • bank fees
  • computers
  • educational classes
  • donations
  • downtime labor costs
  • insurance
  • overhead vehicles
  • rent

How do you cover the cost of your overhead?

There are multiple ways, but one common method is to spread it out over the cost of the labor that it takes to do a job. This is called single overhead recovery. Or, you can spread it out over cost of labor and certain materials. This is called multiple overhead recovery.

The bottom line is to figure out what the overhead of your operation is as closely as you can and then make sure you are including that cost into the cost of your jobs. If you don't recover your overhead, you are not as profitable as you might think.

Here are some good business skills publications from Extension to help you strengthen your businesses practices before spring starts:

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