How Do I Calculate Overhead Costs in My Plumbing Business?

Running a plumbing business isn’t just about charging for materials and labor. To stay profitable, you need to accurately calculate your overhead costs and factor them into your pricing. Many plumbers fail to do this, leading to lower profits or even losses. Here’s a step-by-step guide to calculating overhead costs and ensuring your business remains financially healthy.

1. What Are Overhead Costs?

Overhead costs are all the expenses required to run your business that are not directly tied to a specific job. These are costs you pay whether you’re working or not.

There are two main types of overhead:

✅ Fixed Overheads – Expenses that stay the same each month (e.g., rent, insurance).
✅ Variable Overheads – Costs that change based on business activity (e.g., fuel, tools).

Knowing your overhead costs helps you set the right pricing and ensures you’re not undercharging for your services.

2. List All Your Overhead Costs

Here are common overhead expenses plumbers should consider:

📌 Business Essentials:

• Business registration & licensing fees
• Insurance (public liability, workers’ compensation, vehicle insurance, etc.)
• Accounting & legal fees
• Software subscriptions (estimating software, accounting software, etc.)
• Office rent (if applicable)

📌 Operational Costs:

• Office supplies & utilities (internet, phone bills, electricity)
• Marketing & advertising (website, SEO, business cards, ads)
• Vehicle expenses (fuel, maintenance, registration, depreciation)
• Tools & equipment (maintenance, replacements)
• Uniforms & protective gear

📌 Employee Costs (If You Have Staff):

• Salaries & wages
• Superannuation
• Payroll tax
• Training & certifications

Many plumbers forget some of these expenses, leading to underpricing and reduced profits. Make sure you account for every cost in your business.

3. Calculate Your Monthly Overhead Costs

Once you have listed all expenses, total them up to see how much you’re spending each month on overhead.

For example:

In this example, the plumber has $2,800 in fixed monthly overhead costs before even starting work.

4. Break Down Overhead Per Job or Per Hour

Now, you need to divide your overhead costs to spread them across your jobs. There are two ways to do this:

Option 1: Overhead Per Hour

If you work 160 hours per month (40 hours/week), your overhead per hour is:

📌 $2,800 ÷ 160 hours = $17.50 per hour

This means that for every hour you work, you need to charge at least $17.50 just to cover overhead—before labor, materials, and profit.

Option 2: Overhead Per Job

If you complete 20 jobs per month, your overhead per job is:

📌 $2,800 ÷ 20 jobs = $140 per job

So, you need to add at least $140 to every quote to cover overhead.

5. Add Overhead to Your Pricing

Once you know your overhead, add it to your pricing along with labor, materials, and profit.

For example, let’s say you estimate a job as follows:

• Materials Cost: $500
• Labor Cost: $600
• Overhead (Job-Based Method): $140
• Desired Profit Margin: 30%

Your final price would be:

📌 ($500 + $600 + $140) x 1.30 = $1,274

If you don’t include overhead, you may lose money even if you think you’re charging a fair rate.

6. Review & Adjust Overhead Regularly

Overhead costs change over time (e.g., fuel price increases, new tool purchases), so review them every 6–12 months to ensure your pricing remains accurate.

❗ If you expand your business, hire employees, or upgrade equipment, your overhead will increase, and your rates should reflect that.

Final Thoughts

Understanding and including overhead costs in your pricing is essential for a profitable plumbing business. Without it, you might be working hard but making little profit.

💡 Need help estimating your plumbing jobs accurately? SNZ Plumbing Estimating provides professional takeoffs and cost estimates to ensure you cover all costs and stay profitable.