Contractor Markup and Overhead Rate Calculator
Calculate your contractor markup percentage, overhead rate, and final bid price based on direct project costs, annual overhead expenses, and your desired profit margin.
Labor, materials, subcontractors, equipment for this project
Office rent, insurance, admin salaries, utilities, vehicles, etc.
Total expected revenue for the year (used to allocate overhead)
Typical contractor net profit: 5%–15%
Formulas Used
1. Overhead Rate on Direct Costs:
Overhead Rate = Annual Overhead ÷ (Annual Revenue − Annual Overhead)
2. Project Overhead Allocation:
Project Overhead = Direct Project Cost × Overhead Rate
3. Total Project Cost:
Total Cost = Direct Cost + Project Overhead
4. Bid Price (using desired net profit margin):
Bid Price = Total Cost ÷ (1 − Net Profit Margin %)
5. Markup Percentage:
Markup % = (Bid Price − Direct Cost) ÷ Direct Cost × 100
Note — Markup vs. Margin: Markup is calculated on cost; margin is calculated on the selling price (bid). A 20% markup ≠ 20% margin.
Assumptions & References
- Annual overhead is distributed proportionally across all projects based on direct costs, a standard industry cost-allocation method.
- Annual Revenue is used as a proxy for total project volume to derive the overhead burden rate.
- Net profit margin is applied to the final bid price (selling price), not to cost — consistent with standard accounting definitions.
- Typical contractor overhead rates range from 15%–35% of direct costs (NAHB, AGC guidelines).
- Typical contractor net profit margins range from 5%–15% depending on trade and market conditions.
- This calculator does not account for contingency reserves, bonding costs, or taxes — add those to overhead or direct costs as appropriate.
- Reference: National Association of Home Builders (NAHB) Cost of Doing Business Study; Associated General Contractors (AGC) financial benchmarks.