Does anyone know a professional definition of Overhead and Profit? I'm updating my business plan and notes and am trying to professionally diferentiate the difference between overhead and profit.
I know overhead includes things like insurance, power bill for office, etc, etc, but where do you separate the idea of profit and overhead? Just looking for a professional way to put it on paper.
I know it sounds like a "immature business question", but I'm taking evaluation of my business, and doing some updates in the way I run it, and my rates. I've decided that my rates have to increase to cover my taxes, etc. etc. if I'm going to continue to make it. I've been on my own for about 6 1/2 years now, and need some serious reorganization.
I have found a good website that has good information on things like this, but have not entirely investigated all of it. Here is the address just in case someone else would like to see it: www.toolkit.cch.com/
Thanks Steve..


[This message has been edited by sparkync (edited 10-20-2006).]

[This message has been edited by sparkync (edited 10-20-2006).]

really simple, overhead (OH) is the money you 'need' to pay for things like insurance, advertising, holidays, bonuses, etc. Profit is what you have after every single bill you have is paid. Your salary should be in here. There are about 30-40 items that should be in a typical small business overhead. There are about 5-10 items that a typical small business owner accounts for. Leaves alot of items to be paid out of 'profit'

You can theoretically run a business imperpetuity (sp?) without a profit, so long as all your overhead was covered.

But you won't run a business long without your overhead being covered.

Does that make sense?

edited to add - OH is expenses after the direct cost of the job (COGS -Cost of Goods Sold) this pretty much is material, labor, equipment, subcontractors. Things that are directly attributed to that job.

[This message has been edited by mahlere (edited 10-20-2006).]

[This message has been edited by mahlere (edited 10-20-2006).]

Cant answer your question but youll definately want to look at the overhead list thats been posted in here before, there are so many items on it you dont even think of.