I consult and train contractors as well as having been an electrical contractor myself. The one thing I can tell from both personal experience and observation is that there is no average overhead percentage for a small shop. Now your overhead my cause you to be to high for particular types of work.

I don’t know your background as far as education or early family life but the thing I know is that I was never taught about money or business. You learn it through experience, unless you’re extremely fortunate and have had educators, parents or a mentor that guided you through the early years of your business.

A word of advice when contemplating overhead, I try to think about it on a yearly basis, not weekly. In my opinion looking at things weekly narrows your thinking and causes decisions to be made due to temporary surges and spikes. This week’s cash flow is great, costs are down and this has been true for 5 weeks; let’s go buy the corvette we have always wanted. Two weeks after the car is purchased a pile of invoices from those good five weeks come in and you’re in trouble. First do you have a written business plan for your firm? A business plan in your head is an idea, not a plan. Second calculate out what your yearly anticipated expenses are likely to be. As you get more years under your belt this becomes easier, it is never easy, but it will be easier because you have had increased experience. Now and this is just as hard calculate what your anticipated yearly sales for the firm are going to be for the same period (I told you this may not be easy). Divide the sales by the expenses and you have your anticipated overhead percentages.

Do you think your sales will reach the goal that you set? I doubt it. Do you think your expenses will exceed what you anticipated? Probably! For these reasons you need to check both sales and costs 3 to 4 times a year so that you can adjust your overhead accordingly.

Over the years I and many other firms that I have been associated with have used this method successfully.

Another sticking point with me is to know what your labor burden is for both estimating purposes and tracking purposes. The better you get at this the clearer the path will be for you in the future.

LOL.