Estimating Overhead

NOTE-- In 2000 we retired MacNail and BidMagic (our earlier estimating computer programs), and replaced them with Goldenseal estimating software. There are still die-hard MacNail users, so we keep its manuals available online. Goldenseal also includes accounting, job costing and project management. It lets you add line items that are a percentage of hard costs, or a percentage of total costs. Usually that's the best way to cover your overhead expenses.

Overhead in Estimates

Overhead covers tool depreciation, office expenses, vehicles, insurance, and the other general costs of doing business--anything that can't be assigned specifically to one job. The MacNail construction estimating software includes an additional percentage to cover overhead expenses in each estimate.

NOTE: Project overhead (permits, etc.) are handled as construction line items in Specifications.

If you are used to including contingencies and job supervision costs under 'overhead", you may want to drop your usual markup percentage by 8 to 10%.

The best way to arrive at an overhead percentage:
1. Add up your gross dollar volume for one year (or some other time period).
2. Add up your basic overhead costs--every cost that cannot be assigned to a particular job.
3. Divide #2 by #1, and multiply by 100. This will produce your average overhead percentage.
4. You can apply this overhead percentage evenly to all jobs. If you have a seasonal business, you can apply a higher percentage to the busy season, and a lower percentage to the slow season.

NOTE: The typical overhead range is 5-20% but it can go higher if you have a showroom or other similar expenses.

The MacNail estimating software applies the same overhead, profit and contingency percentages to labor, materials and subcontractors. You may want to charge a different percentage on each part of the job (instead of charging the same amount for all parts of the job). To do so:
1. Go to the Summation area.
2. Click on one of the cells in the overhead, profit or contingency rows.
3. Click in the formula bar.
4. Replace the variable name (oh, profit or cont) with the percentage markup you desire.