Understanding Overhead: What Every Insulation Contractor Should Know
When you run an insulation business, you know how to calculate material costs, labor hours, and profit margins on every job. But there’s another piece of the puzzle that’s just as important and often overlooked overhead.
Knowing what overhead is (and how to manage it) can make the difference between barely getting by and building a strong, profitable business.
What Exactly Is “Overhead”?
In simple terms, overhead is everything your business pays for that isn’t directly tied to a specific job but is still necessary to keep the business running.
Think of it as the “cost of staying open.”
Common examples of overhead for insulation contractors include:
Office rent or your home office expenses
Vehicle payments, fuel, and maintenance
Insurance (liability, workers comp, auto, etc.)
Office supplies, phones, and internet
Marketing and advertising costs
Accounting, bookkeeping, and software fees
Employee benefits or admin wages
Licenses, certifications, and continuing education
Even if you didn’t book a single job this month, you’d still have to pay many of these costs.
Why Overhead Matters
A lot of small contractors make the mistake of only charging for labor and materials when quoting a job. The problem? That means you’re paying your overhead out of your own pocket.
When you don’t build overhead into your pricing, you might be busy all the time — but still not profitable.
Your overhead percentage helps you figure out how much you need to charge to cover all your expenses and make a profit.
How to Calculate Your Overhead
Here’s a simple way to start:
Add up all your overhead costs for the year.
(Everything not directly tied to a job.)
Divide that by your total annual sales.
Example:
$100,000 in annual overhead
$500,000 in annual sales
→ Overhead = 20%
That means 20% of every job’s price needs to go toward covering your overhead before you even think about profit.
Once you know that number, you can make smarter decisions when pricing, budgeting, and planning for growth.
How to Keep Overhead Under Control
You can’t avoid overhead but you can manage it. Here’s how:
Track Every Expense
Use accounting software to keep track of what’s going out each month. Little things like fuel, insurance hikes, or subscriptions add up fast.
Review Costs Regularly
Review your expenses quarterly or twice a year. Ask yourself:
Do I still need this service?
Can I get a better rate?
Is there a more efficient tool or system?
Build It Into Every Estimate
Always price your jobs to include your share of overhead. That way, every job helps pay the bills that keep your business running. RSense360 will help you keep track of your jobs to help understand your quotes and how accurate they are.
Plan for Growth
As your business grows maybe you add a truck, hire a crew member, or rent a small warehouse your overhead changes. Recalculate regularly to make sure your pricing stays accurate. RSense360 helps you understand your year over year growth to help you grow your business and make perfect.
The Bottom Line
Understanding overhead isn’t just “business talk” it’s a key part of running a sustainable, profitable insulation company.
When you know your numbers, you can price jobs with confidence, invest in growth, and protect your bottom line.
At RSense360, we believe smart business practices are just as important as quality workmanship. Whether you’re insulating homes or commercial buildings, keeping an eye on your overhead helps you build a business that’s efficient, profitable, and built to last.
