How Overhead Costs Impact Project Profitability
Overhead costs represent a significant portion of a construction company’s overall expenses. Even though they are not project-specific, they must be factored into the pricing of every project to ensure profitability. Accurately calculating overhead costs helps contractors set realistic prices that cover both direct project costs and general business operations.Best Practices for Managing Overhead Costs
To effectively manage overhead costs, contractors should regularly review their administrative expenses and look for opportunities to reduce unnecessary spending. Overhead should be distributed proportionally across all projects to ensure it is covered in every bid or pricing model.Related Terms: Markup, Cost-to-Complete, Cashflow Forecast