Apply overhead and profit to a job's cost to get the price — the classic contractor O&P method (often quoted as "10 and 10").
This applies overhead to cost, then profit to the total — the common contractor convention. Some contracts apply both to cost directly; confirm which your bid uses. Estimate only.
Contractors often add 10% overhead and 10% profit to a job's cost — but applied in sequence, "10 and 10" is about 21% on top, not 20%. Overhead covers running the business; profit is what's left for you.
Price = cost × (1 + overhead %) × (1 + profit %)
Overhead and profit is the contractor convention for turning a job's direct cost into a price. Direct cost is what the job itself consumes: materials, labor with burden, subcontractors, permits, equipment. The overhead percentage recovers the cost of being in business that no single job can be billed for — office, insurance, vehicles, estimating time, software, the owner's admin hours. The profit percentage is the return on the risk and the capital, and it is applied to cost plus overhead, not to cost alone. That sequencing is what the calculator models and what the arithmetic quietly turns against you: 1.10 × 1.10 = 1.21, so "10 and 10" adds 21% to cost. The model ignores whether your overhead rate is right for this year's volume, and it says nothing about whether the profit percentage yields the margin you intend — which is exactly where the trouble is.
Job cost $10,000. Overhead at 10% adds $1,000, for a subtotal of $11,000. Profit at 10% of that subtotal adds $1,100, for a price of $12,100. Now measure the profit the honest way, as a share of the price: $1,100 ÷ $12,100 = 9.1%. The contractor who reads "10% profit" as a 10% margin is earning less than that on every job. To actually clear a 10% margin on this job, the price would need to be $11,000 ÷ 0.90 = $12,222, with $1,222 of profit — and the difference of $122 on a single $10,000 job is a full percent of the year on a $1 million book of work.
Some contracts, insurance restoration work in particular, apply both percentages to cost directly rather than in sequence. On the same job that gives $10,000 × 1.20 = $12,000, $100 less than the sequential method. Neither is wrong; the bid document should say which one it uses, and the fine print under the calculator reminds you to check.
This page prices one job. Whether the overhead percentage is right is a question only a year of books can answer, and whether the profit survived contact with the job is a question only a quoted-versus-actual record can answer. The Job Cost & Markup workbook in our Trades Job & Money Toolkit keeps that record per job and computes the real margin each one delivered, and the job cost calculator builds the direct-cost base this page starts from. For the fuller argument on what margin a trades business needs, see contractor profit margin.
No — applied in sequence it's 1.10 × 1.10 = 1.21, so about 21%. Small difference, real money on a big job.
Overhead pays for the costs of being in business (office, insurance, admin). Profit is your reward for the risk and capital — keep them separate so you can see both.
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