The 21 Overhead Categories Contractors Should Track

The rule that actually governs

A job cost is a cost your company consistently assigns to producing a specific job. Overhead is a business cost recovered through your markup instead. Reasonable companies can classify the same expense differently; what none of them can survive is inconsistency. Every cost must be recovered exactly once: in the estimate, or in the markup. Never omitted, never counted twice.

A useful first-pass question: would I still incur this expense without this particular job? If yes, it is probably overhead. But some costs are legitimately a company-specific call, and for those, consistency between your estimates and your markup matters more than the label.

Your markup is only as good as your ability to predict overhead and job costs consistently. The categories below are the buckets that make the prediction consistent. Build your own overhead in them instead of borrowing someone else's percentage.

Worked example

Overhead sets your markup directly. With overhead and profit as shares of revenue, the markup multiplier is 1 / (1 - overhead - profit). Take a shop with a $500,000 revenue goal and $120,000 of true overhead, targeting 10% profit.

5x8 bathroom remodel, fully itemized →

Inputs

• True overhead: $120,000 on a $500,000 revenue goal, 24% of revenue
• Profit target: 10% of revenue
• Markup multiplier: 1 / (1 - overhead - profit)

Actions

• With honest books: 1 / (1 - 0.24 - 0.10) = 1 / 0.66 = 1.52x, a 51.5% markup
• Now suppose you decide $30,000 of that overhead, some supervision here, some selling expense there, really belongs in job costs. That can be a legitimate call. Reclassifying is fine when the dollars land consistently in every applicable estimate: a lower markup applied to a larger job-cost base can recover the same money
• The disaster is doing half the move. The $30,000 leaves the overhead budget, so the multiplier falls to 1 / (1 - 0.18 - 0.10) = 1 / 0.72 = 1.39x, a 38.9% markup. But the expense never gets added to any estimate. Now it is recovered nowhere
• On the published 5x8 bathroom estimate with a direct job cost of $19,867.38: priced at the required 51.5% markup, the job sells for $30,102.09. Priced at the half-moved 38.9% against the same unchanged job cost, it sells for $27,593.58
• The omission gives away $2,508.51 on this one bathroom, and every job that year makes the same donation

Reclassification is a choice; omission is a leak. Whatever you call a cost, it must show up exactly once, in the estimate or in the markup, and a half-move recovers it nowhere.

All 21 categories at a glance

The ranges below are Clamp planning defaults: working guardrails from residential contracting and teaching experience, shipped in Clamp's overhead builder and grouped the same four ways. They are not industry averages and not benchmarks. Do not build your markup from somebody else's percentages; enter your actual costs wherever you have them, and use the ranges to sanity-check what you might be forgetting. These are pricing and cash-planning categories, not Schedule C deduction lines. One planning category can require several tax classifications, and some funding requirements are not deductible expenses at all. The clearest case is your own pay: Schedule C's cost-of-labor line says not to include amounts paid to yourself, while this budget must carry it.

The categories

Every expense gets one primary home, or you will count it twice. The rule used here and in Clamp's builder: department categories hold both department labor and department-specific tools, while shared systems used across the business sit in Core Software. A subscription appears in one category only. So shared software sits in Core Software, all training in Training & Development, all company insurance in Insurance & Bonding, all vehicle costs in Vehicles & Fuel, regardless of which department uses them.

Tap a category for what belongs in it, what does not, and the mistake to avoid.

Anything that fits none of these buckets gets its own named line item, not a dumping ground. An expense you cannot name is an expense you cannot predict, and unpredicted overhead is how markups end up wrong.

How overhead tends to scale

Overhead tends to climb as the operation grows, because each stage adds people and infrastructure. A planning model from the companion guide on the four stages of a remodeling business:

These are planning bands, not targets; your own ledger outranks any table.

Put it to work

Total your overhead, add your profit target as shares of revenue, and the markup follows from the multiplier, walked through on the same published bathroom estimate in the markup vs margin guide linked below. If you want a direct job cost to apply it to, describe a job in the free estimator.

Sources & provenance

1. Clamp overhead planning defaults Clamp (owner-supplied)
2. About Schedule C (Form 1040), Profit or Loss from Business Internal Revenue Service (official)