Overhead Recovery for Electrical Contractors
Covering wages and materials does not pay every business expense. Overhead recovery assigns a reasonable share of the cost of running your business to the work you sell.
Identify Overhead
Examples include office costs, rent, software, accounting, marketing and business insurance. Vehicles, fuel, tools and administrative time may be overhead or job costs depending on your method. Do not include the same expense in both places. Exclude labor costs already recovered through your loaded labor rate and efficiency calculation.
Calculate Your Rate
- Total annual overhead from your records.
- Estimate the annual billable hours for the whole crew whose work will recover that overhead.
- Divide annual overhead by those billable hours.
- Multiply the rate by the estimated billable labor hours on each job.
- Review the assumptions when costs or workload change.
Illustrative example: $120,000 annual overhead / 4,680 crew billable hours = $25.64 overhead per billable hour, rounded. A 10-hour job carries about $256.41 using the unrounded rate. This is an allocation model, not a claim that every extra hour creates that much new overhead.
Frequently asked questions
The free checklist helps identify missed cost categories. The $79 Excel Profit & Pricing System incorporates overhead assumptions into job break-even and recommended pricing.
Related guides
Is overhead profit?
No. Overhead is a cost; estimated profit is what remains after the costs included in the model.
Should every job use the same rate?
Start with a consistent company rate and use documented reasons for any different allocation.
Where does contingency fit?
Contingency is an allowance for job uncertainty. It does not replace overhead.
When should I update the rate?
When overhead, crew size or expected billable hours change, and during your regular pricing review.