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Contractor overhead recovery and break-even calculator

Every job has to carry its share of the office. Enter annual overhead, revenue, the gross margin your jobs earn and the net profit you want, and see the margin and markup you need to bid at, and the revenue you have to reach before any job makes money.

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Tool 08

Overhead recovery & break-even

Every job has to carry its share of the office, the yard and the trucks. This works out the markup your overhead needs, and the revenue where the company stops losing money.

Company year

Result

Overhead rate = overhead ÷ revenue. Required gross margin = overhead rate + target net profit. Required markup on cost = required margin ÷ (1 − required margin). Break-even revenue = overhead ÷ gross margin — below it, jobs do not earn enough to pay for the office.

How to use it

  1. Enter annual overhead — everything not charged to a job.
  2. Enter annual revenue.
  3. Enter the gross margin your jobs actually earn.
  4. Enter the net profit you are aiming for, and read the required margin, markup and break-even.

A worked example

$1.2M of overhead on $12M of revenue is a 10% overhead rate. To net 5% you need a 15% gross margin — a 17.6% markup on cost. At a 12% gross margin, break-even revenue is $10M.
Want the background? The guide works through the arithmetic, the mistakes that hide problems, and a checklist.
Read: Construction KPIs →

Questions

How do you calculate contractor overhead rate?

Annual overhead divided by annual revenue.

What gross margin do I need?

Your overhead rate plus the net profit you want. At 10% overhead and a 5% profit target, jobs need a 15% gross margin.

How do you calculate break-even revenue?

Overhead ÷ gross margin. Below it, jobs do not earn enough to pay for the office.

How do I turn a required margin into a markup?

Markup = margin ÷ (1 − margin). A 15% margin needs a 17.6% markup on cost.

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Want this on your live data, every morning?

These tools are manual. The dashboard does the same arithmetic across every job, every company and every week — plus the money-at-risk view, the audit findings and the overrun radar. Join the private beta and we will connect it to the systems you already run.