Bid price = direct costs ÷ (1 − overhead rate − target net margin). If your direct costs are $220K, overhead rate is 15%, and you want 6% net profit: $220K ÷ (1 − 0.15 − 0.06) = $220K ÷ 0.79 = $278K. Price it at $250K and you're pricing in a loss before the first crew shows up.
Overhead creeps as the business grows. You add a PM, a truck, new software, more insurance. If you recalculate annually you're often pricing at last year's overhead on this year's cost structure — and giving away 2–4 points of margin on every job without knowing it.
Everything that is NOT a direct job cost: office rent, admin salaries, owner's salary if not on a specific job, unassigned vehicles, insurance, software subscriptions, accounting fees, advertising. Field labor, materials, subs, and job-assigned equipment are direct costs — keep them out of your SG&A number.
Divide total SG&A by total revenue. $480K overhead on $3.2M revenue = 15.0% overhead rate. Build that rate into every bid. Recalculate quarterly — it changes as the business grows.
All non-job expenses: office rent, admin and PM salaries, owner salary (if not on a specific job), unassigned vehicles, insurance, software, accounting fees, and any other SG&A expense. Field labor, materials, subs, and job-specific equipment are direct costs — not overhead.
It depends on trade and revenue level. Civil and concrete at $1M–$5M: 12–16%. Electrical and mechanical: 14–18%. As revenue scales past $10M, overhead typically compresses to 10–13%. The right target is your actual rate — known, tracked, and priced for on every bid. See full benchmarks at constructioncfo.net/construction-overhead-rates-by-trade.
If your overhead rate is higher than you thought, that's the first thing we fix.
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