Overhead Recovery & Markup

Welcome

Hello, and welcome. This is Super Structures General Contractors — a national general contractor headquartered in Powhatan, Virginia — here to help you and your clients build something that lasts. We're glad you're with us, and we look forward to connecting with you.

Let's talk Overhead Recovery & Markup, because getting this right makes everything after it easier. Cut through everything, and it's this: If your markup doesn't include overhead, you're paying for the office out of profit. Do this right and it shows up in your work, your reputation, and your paycheck.

Your price has to cover three things: direct job cost + a share of overhead + profit. Miss the middle one and you'll "make money on the job, lose money in the business."

Direct cost vs. overhead

• Direct cost — labor, material, equipment, subs for that job.
• Overhead — the cost of running the company: office, insurance, admin, vehicles, your salary.

Recover overhead in your markup

Estimate your annual overhead, then build a recovery rate into every bid (e.g., overhead ÷ expected revenue). Then add profit on top.

Markup vs. margin (again, because it matters)

To hit a target margin, mark up by margin ÷ (1 − margin) — 20% margin needs 25% markup. Add a contingency for risk on tougher jobs.

Going Deeper (Intermediate)

Your price must cover three things: direct cost + overhead + profit. Overhead (G&A: office, insurance, trucks, software, your salary) doesn't belong to one job — you recover it through markup across all jobs. Forget it and your "profit" is fake.

Advanced / Pro-Level

The math that keeps contractors solvent:

• Overhead recovery rate = annual overhead ÷ annual revenue (or ÷ direct cost). If overhead is $300k on $2M revenue, you must recover 15% just to break even — before any profit.
• Markup vs. margin (the perennial trap): to make a 15% margin, divide cost by 0.85 (~17.6% markup), not multiply by 1.15.
• Under-recovery when volume drops: overhead is largely fixed, so if revenue falls your recovery % must rise — contractors who keep the same markup in a downturn quietly lose money.
• Breakeven volume = overhead ÷ gross margin %. Know it. Never "buy work" below cost + overhead just to stay busy.

Practice Challenge

Overhead is 12% of cost and you want 10% profit. What markup on cost do you need? (Answer: you must add 12% for overhead + profit on top — target margin ≈ 22%, so markup = 1 ÷ (1 − 0.22) − 1 ≈ 28% on cost (not a flat 22%); confusing markup with margin is how "profitable" jobs lose money.)

In Practice

A contractor marks up only direct cost plus profit — and pays the office rent out of profit, slowly going broke 'on profitable jobs.' Build overhead recovery into every bid.

Common Mistakes to Avoid

• Leaving overhead out of the markup
• Confusing markup with margin
• No contingency for tough jobs

Takeaway: If your markup doesn't include overhead, you're paying for the office out of profit.

Educational content — not legal, financial, or accounting advice. Run your numbers with your CPA.