If Your Jobs Look Profitable, But You’re Still Broke… This Is Why... Overhead

Mistake #3: Overhead Allocation Confusion

You just wrapped up another busy quarter. The jobs were booked. The crews were hustling. Your job costing report says you made $400,000 in profit.

So why are you still scrambling to make payroll?

That question right there? It’s what I call the Overhead Illusion—and it’s one of the silent killers of construction company cash flow.

What Is Overhead?

Overhead includes all the indirect costs required to run your business—expenses that aren't tied to a specific job but are still very real:

• Office rent

• Admin salaries

• Insurance

• Software like QuickBooks or Buildertrend

• Utilities, phones, internet

• Your owner salary (if not tied to job sites)

• Professional services like your bookkeeper or legal help

These costs don’t go away just because you don’t assign them to a job—and that’s the trap.

Overhead Allocation Confusion

The Costly Mistake

Too many contractors bid jobs like this:

Materials + Labor + Subcontractors = Total Bid

…without any overhead included. So when that job finishes, it may look profitable—but all the overhead has to come from somewhere. And usually, it comes out of your pocket.

You think you’re earning a profit, but in reality, you’re just covering what you should have built into the bid.

How to Fix It

Here’s how to build overhead into your pricing strategy:

1. Calculate your monthly overhead – Be honest and include everything.

2. Divide it by your average monthly revenue to get your Overhead Recovery Rate.

   • Example: $25,000 overhead ÷ $100,000 revenue = 25%

3. Add that percentage to every bid before applying your desired profit margin.

4. Update quarterly or after major changes (new hires, new software, etc.)

Even if you start with a placeholder rate of 10–15%, it’s better than nothing.

What Happens When You Do This Right?

✅ Your bids are more accurate✅ Your profits are predictable✅ You stop bleeding cash✅ You finally understand why your bank balance never matched your “profits”

Bottom line: You can’t keep ignoring overhead.It’s the reason you feel broke even when your jobs “look good” on paper.

👉 Want more clarity? Download my free ebook that walks you through the 12 biggest mistakes construction companies make—and how to avoid them:

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