Quick Answer
How do you calculate overhead and profit in roofing?
How roofing companies calculate overhead recovery and profit correctly: where the ten and ten rule comes from, why it under-collects, and the math that replaces it.
The short answer
- Overhead recovery rate = annual overhead ÷ annual revenue, usually 15 to 20 percent for roofers.
- Overhead is added to job cost; profit is applied with a divisor, not a markup.
- The ten and ten convention comes from insurance adjusting and rarely covers a real roofing company.
- Recalculate the rate yearly, because insurance, fuel and advertising move.
What counts as overhead
Overhead is everything you pay whether or not a roof goes on tomorrow.
- Office rent, utilities, software and phones
- Owner and admin pay, sales salaries
- General liability, workers comp admin, licensing
- Trucks and fuel not charged to a job
- Advertising, lead costs and CRM fees
The two-step calculation
Step one: overhead recovery rate is annual overhead divided by annual revenue. Step two: add that dollar amount to job cost, then divide the total by one minus your target profit margin.
Why ten and ten falls short
Ten and ten is an insurance adjusting convention, not a cost study of your company. If your real overhead is 18 percent of revenue, every ten percent bid gives away eight points before profit.
Markup and margin are not the same
A ten percent markup on cost is a 9.1 percent margin. A ten percent margin needs a 11.1 percent markup. Small on one job, large across a year.
Illustration: overhead recovery for a $3.2M roofer
- Annual overhead
- $576,000
- Annual revenue
- $3,200,000
- Overhead recovery rate
- 18%
- Job cost on a sample roof
- $8,600
- Overhead added
- $1,548
- Price at 12% net target (÷ 0.88)
- $11,532
What this tells you: Example numbers, not a client's books. The overhead line is bigger than the profit line — which is why guessing it is expensive.
What you see inside LedgerDude
This is the page you get each month once your books are closed — the numbers behind every answer on this site.
In one sentence
Overhead is last year's operating costs divided by revenue, added to job cost. Profit is applied by dividing that total by one minus your target margin.
Price a roofing job
Put in what one job costs you and the markup you want. We show the price to quote, what you actually keep, and the numbers your books should be watching. Nothing is saved unless you save it.
Shingles, underlayment, flashing, dump fees — everything you buy for this roof.
Crew pay or subcontractor cost for this job, including payroll taxes.
This job's share of trucks, insurance, office and advertising.
How much you add on top of total cost. 35% markup on cost is common.
One square is 100 square feet. Leave at 0 if you do not know.
Total hours all crew members spend on this job.
How many roofs this size you do in a normal month. Used for your monthly targets.
Price to quote
$11,745
Total cost plus your markup.
Profit you keep
$3,045
After materials, labor and overhead.
Profit margin
25.9%
Profit as a share of the price. Healthy roofing work usually lands 10-20%.
Gross margin
38.7%
Price minus material and labor only. This is the number to quote against.
Break-even price
$8,700
Quote below this and the job loses money.
Price per square
$392
Easy way to sanity-check a bid against past jobs.
Numbers your books should track
Profit per square
$102
Compare jobs of different sizes fairly.
Gross profit per crew hour
$76
What one hour on the roof earns you before overhead.
Sales per labor dollar
3.92x
Every $1 of crew pay should bring in $3 or more.
Materials share of price
35.8%
Creeping up? Supplier prices moved and your bids did not.
Labor share of price
25.5%
Rising here usually means jobs are taking longer than you bid.
Overhead covered
$4,545
Gross profit has to cover $1,500 of overhead on this job.
What if costs move?
Slide these to see what happens to this job if material or labor cost changes and your price stays the same.
Now $4,200 instead of $4,200.
Now $3,000 instead of $3,000.
Profit at those costs
$3,045
Same quoted price, new costs.
Profit margin then
25.9%
What the same job would really pay you.
Cost change
$0
Dollars added to or taken off this job.
Your monthly targets
Based on 8 jobs like this one each month.
Revenue to book
$93,960
What you should quote and collect this month.
Overhead to cover
$12,000
Trucks, insurance, office and advertising.
Profit you should keep
$24,360
After all costs and overhead.
Gross profit needed
$36,360
Price minus material and labor, added up.
Jobs just to break even
2.6
Below this, the month loses money.
Crew hours to sell
480 hrs
Make sure you have the crew to cover it.
Take this with you
Download a one-page PDF with your overhead, gross margin and monthly targets. Good for the truck, the bank, or your next crew meeting.
Related answers
Straight answers to the other questions roofing owners ask us.
How do you price a roofing job?
Add up squares of material, crew labor, dumpster, permit and subs to get job cost, add your overhead recovery rate, then divide by one minus your target margin.
What is a good profit margin for a roofing company?
Residential roofing should run 30 to 40 percent gross margin and 8 to 12 percent net profit; repair work carries higher margins than full replacements.
What KPIs should a roofing company track?
Track gross margin by job, material cost share, close rate, average job size, weeks of cash and days to get paid. Six numbers, once a month.
What is a good profit margin for a contractor?
Most trade contractors should run 25 to 45 percent gross margin depending on how material-heavy the work is, and 8 to 12 percent net profit.
What is labor burden rate and how do you calculate it?
Labor burden is everything an employee costs beyond wages — taxes, insurance, benefits, vehicle and tools — and it usually adds 25 to 60 percent on top of the hourly wage.
Run a different trade?
Questions people ask
Do I apply overhead to material too?
Yes, if your recovery rate was calculated against total revenue. Material-heavy jobs consume ordering, delivery and warranty admin like any other work.
How often should I recalculate?
At least yearly, and again after any big change in insurance, advertising spend or office payroll.
What if my bids stop winning?
That is information, not a reason to cut the rate. Losing bids at a correct price usually means a lead source or sales process problem, not a pricing problem.
What does this cost?
One flat monthly price. No hourly bills, no surprises. Founding plans start at $149 a month, and your rate stays locked.
Keep reading
What is a good profit margin for a roofing company?
Residential roofing should run 30 to 40 percent gross margin and 8 to 12 percent net profit; repair work carries higher margins than full replacements.
How do you price a roofing job?
Add up squares of material, crew labor, dumpster, permit and subs to get job cost, add your overhead recovery rate, then divide by one minus your target margin.
What is a good profit margin for a contractor?
Most trade contractors should run 25 to 45 percent gross margin depending on how material-heavy the work is, and 8 to 12 percent net profit.
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