What Not to Overlook: Common Overhead Expenses for Residential Contractors

These are legitimate contractor overhead costs that are necessary to support your operation as a whole.

Facilities

• Home Office Rent or Lease Payments – Obviously not applicable to any specific projects.

• Facility Maintenance Expenses – Including professional office cleaning, professional floor-mat service to protect high-traffic areas, and extermination and snow-removal services.

• Office Expenses – Utilities (electricity, gas and water), furniture, phones, computers, Internet service, office supplies and shop supplies. Essentially, whatever is required to run your company from its primary location. And, yes, that can even include kitchen supplies, beverages and food that you provide for the benefit of your employees.

• Storage/Warehouse Space Fees – Payments to rent or lease a separate, nearby space for storing equipment or stockpiling materials.
  
  

Indirect Labor

As a subcategory, this is one of the largest overhead expenses for residential contractor businesses. It typically includes:

• Office Staff Payroll – Salaries, employment taxes, benefits, bonuses, vacation, and retirement plans for full-time and part-time office employees who do not perform work at job sites (e.g., managers, administrative personnel, bookkeeping/accounting employees, human-resources employees, and salespeople).

• Recruiting Costs – Expenditures necessary to fill existing or new positions.

• Training/Personal Development Expenses – Fees pertaining to job-related office staff education such as online classes, in-person classes, fee-based webinars, or self-study courses.
  
  

Transportation

• Fuel expenses – For general-purpose, company-owned vehicles (e.g., ones used by management and sales personnel).

• Vehicle Buying/Leasing, Maintenance and Repair Expenses – For general-purpose, company-owned vehicles.
  
  

Miscellaneous Items

• Advertising, Marketing and Promotion – Includes participation in home shows as well.

• Bank Fees – Sometimes required for business banking accounts.

• Charitable Contributions – Donations to local charities, schools, youth sports teams, etc.

• Company Mobile Devices and Data Plans - The costs of owning and using mobile devices are fixed because these are paid on a regular basis.

• Depreciation Expenses – Depreciation for fixed assets (such as office equipment) that fall under the “general cost of doing business” and are not associated with specific projects.

• Government Fees and Licenses – Any special local or state requirements your company must meet to operate legally.

• Indirect Materials – Project materials that are used to complete jobs but are not easily traceable to a single job – such as staples, screws, nails, adhesives, caulk, painter’s tape and welding supplies.

• Insurance – Business insurance necessary to keep your company operating, plus vehicle insurance, employee health insurance, worker compensation insurance, and unemployment insurance.

• IT Assistance – Any technical service provided by an IT service provider to make sure your computers and servers are working properly and your data is secure.

• Loan Interest – Related to company borrowings.

• Professional Services – Any fees you pay to your attorney, your CPA, or an auditor. Be sure to keep track of all invoices your business receives.

• Sales Expenses – Sales materials and tools that are used to acquire new customers.

• Signage – For your building and company vehicles.

• Subscription Fees – Including annual fees for industry magazines and any SaaS (Software as a Service) products that your office uses.

• Taxes – On property, land or other company assets.

Read more: How specialized construction apps can help with your next residential job.

Now let’s move on to the second category…