SHOP, YARD, AND WAREHOUSE OVERHEAD, HOW TO ALLOCATE IT CORRECTLY.
Every subcontractor with a yard, shop, or warehouse carries a fixed cost infrastructure that most contractors only partly account for in the overhead rate. The lease is usually in there. The yard manager's salary is often missing. Fueling infrastructure, forklift maintenance, and security systems usually sit in a vague general expense category that neither fully captures them nor allocates them correctly. The result is an overhead rate that understates the real cost of the yard operation by $20,000 to $60,000 a year. The fix is an annual shop and yard overhead inventory that accounts for every cost and puts each one where it belongs.
The reason this one hides is that nobody disputes the lease. It's a big obvious number sitting in the right account, so the whole category feels handled. What sits around it's small and scattered: a wash bay, a diesel tank, racking, a forklift service call, and the yard manager who is coded as field labor because he used to run a crew. Total it once and it's two or three points of revenue that never made it into a bid. At a $4M subcontractor, shop and yard overhead commonly runs $60,000 to $120,000 a year.
WHAT IT MEANS.
Shop, yard, and warehouse overhead is the fixed cost of the place where you store material, park and fuel equipment, and run a shop, and all of it belongs in the overhead rate you bid with.
The inventory is longer than most contractors expect. It covers the yard or shop lease or ownership costs, storage fees for materials and equipment, the shop foreman or yard manager salary, small tools storage and maintenance and replacement, shop utilities including electricity and water and compressed air, fueling infrastructure with the diesel tank and dispensing pump and the installation cost amortized, security systems, vehicle storage and wash bay operations, and laydown yard equipment like forklifts, pallet jacks, and storage racks.
THE FIXED COSTS THAT LIVE IN THE YARD, AND NEVER MAKE THE BID.
Shop costs are in overhead but not fully calculated
The lease is there and the utilities are there, but the shop foreman's salary is missing, or equipment storage and maintenance costs were never allocated to the yard at all. The overhead rate understates the real cost of the shop operation, so every bid built on that rate recovers less than the yard costs to run. Nothing about it looks wrong on the P&L, because the money did get spent and it did get coded somewhere.
Project-specific yard costs sit in general overhead
Materials stored for one specific project, a temporary laydown area for a single job, and dedicated yard space for one customer's material all belong in direct job cost. When they sit in general overhead instead, the overhead rate is overstated and the job cost is understated. Both numbers are wrong at the same time in opposite directions, which is why the bid rate and the job margin never quite agree with each other.
The call never gets made, so everything defaults to overhead
The line between a fixed yard cost and a project-specific yard cost takes a judgment call at the start of each project. When nobody makes that call, the cost defaults to overhead and the job that caused it never carries it. Making the call out loud at project start is better than letting the default decide it for you every time.
WHAT IT LOOKS LIKE IN DOLLARS.
At a $4M subcontractor, shop and yard overhead commonly runs $60,000 to $120,000 a year, all of which is a fixed cost of doing business that belongs in the overhead rate. When it's only partly captured, the understatement usually runs $20,000 to $60,000 a year. That's what the bid rate is short before you price a single job.
THE CALCULATION THAT CAPTURES EVERY YARD AND SHOP COST.
The list covers lease or depreciation on owned property, utilities, staff including the shop foreman and yard manager and driver, equipment in the yard such as forklifts and fuel dispensing and maintenance lifts, insurance specific to the yard, and security. Each one gets totaled annually from prior year actuals rather than estimated. The total is the starting point for everything else on this page.
Costs that exist regardless of which projects are active are fixed. Costs that exist because of a specific project or a specific customer are direct job cost. That single test settles almost every line on the inventory in a few seconds.
The shop and yard overhead total divided by annual revenue is the overhead rate contribution from shop operations. That's the number that was missing from the bid rate. It goes into the rate the estimator uses, not into a footnote.
When materials for a specific project are going to be staged in the yard, a direct job cost code for that project's yard usage gets created before the material shows in the gate. The cost is billed to the project rather than to overhead. The job carries what the job caused.
The shop and yard calculation often surfaces equipment ownership costs that weren't fully captured in the fleet burden analysis. When both are done at the same time, the overhead rate update is complete rather than partial: fleet burden, shop overhead, indirect labor, and owner salary all corrected in one calculation. That's the rate we want sitting in the bid model.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
