💼 Ever feel like you’re working hard, making sales, and still wondering where all your money went? It might be hiding in a little thing called overhead.
Don’t worry — overhead isn’t scary. It’s just the behind-the-scenes costs of running a business. Once you know how to calculate it, you’ll have more control over your budget, pricing, and profits.
Let’s break it down the simple way.
Table of Contents
🙋 What Is Overhead?
Overhead includes all the ongoing expenses needed to keep your business running — but not directly tied to making a product or delivering a service.
Think of it as the stuff that keeps the lights on (literally).
🧾 Examples of Overhead
- Rent or mortgage on your office/shop
- Utility bills (electricity, water, internet)
- Insurance
- Office supplies
- Admin salaries
- Software subscriptions
- Marketing expenses
Basically: if you’d pay for it even if you didn’t make a sale, it’s overhead.
🧮 How to Calculate Overhead
Here’s a super simple formula:
Overhead Rate = (Total Overhead Costs ÷ Total Sales) × 100
This gives you your overhead as a percentage of your revenue — which is super useful for pricing and planning.
☕ Real-Life Example
Let’s say:
- Total monthly overhead costs = $5,000
- Total monthly sales = $20,000
Now plug into the formula:
Overhead Rate = (5,000 ÷ 20,000) × 100
= 0.25 × 100
= 25%
✅ So, your overhead rate is 25%. That means for every dollar you earn, 25 cents go toward running your business — before you even think about product costs or profit.
📊 Why Overhead Matters
- Helps you set the right prices
- Keeps your profits healthy
- Shows where you can cut costs
- Helps with budgeting and forecasting
Basically, if you’re guessing instead of calculating overhead, you’re flying blind. 😅
🛠️ Overhead Calculator
Enter Overhead Costs and Sales values and the tool will calculate the Overhead.
💡 Pro Tips
- Track it monthly: Costs can shift, and knowing your average helps with planning.
- Break it down: Group expenses into categories (e.g., utilities, rent, software).
- Watch your ratio: A high overhead rate could mean it’s time to trim the fat.
🎁 Final Thoughts
Calculating overhead might not be as exciting as making sales or designing your next big idea — but it’s one of the smartest things you can do for your business.
Just remember:
Overhead Rate = (Overhead Costs ÷ Sales) × 100
Once you’ve got a handle on your overhead, you’ll have a clearer picture of what you need to earn, where your money goes, and how to grow smarter.