Three slices of every job
Cost of sales is what the job itself costs: subcontractors, materials, plant and the labour that does the work. Overheads, or opex, are what it costs to run the business all year: rent, vans, insurance, office wages, software. Net profit is what is left once both are paid.
| Job price | £10,000 | 100% |
|---|---|---|
| Cost of sales | £6,800 | 68% |
| Gross profit | £3,200 | 32% |
| Share of overheads | £2,100 | 21% |
| Net profit | £1,100 | 11% |
Why it matters
A job can show a healthy gross profit and still lose money once it carries its share of the overheads. A business that grows on jobs like that grows its losses, because every new job brings its share of the running costs with it.
Knowing the split before you price means you quote from the net profit you need, not from a habit.
Two ways to give it your overheads
If you know your profit and loss, use the percentages from it: cost of sales and overheads as a share of turnover. If not, enter your yearly overheads and yearly turnover once, and the calculator works the rate out. Both give the same answer.
Questions
What is the difference between gross profit and net profit?
Gross profit is the price less the cost of sales. Net profit is gross profit less the job's share of your overheads. Gross profit pays the overheads; net profit is what the business keeps.
What is an overhead rate?
Your yearly overheads divided by your yearly turnover. If overheads are a fifth of turnover, every job has to give up a fifth of its price to running the business before it makes any profit.
What price do I need to make my target profit?
Divide the cost of sales by one minus your overhead rate minus your target net margin. The calculator does it for you.
Where the figures come from
Every number this tool works with is one you enter. It uses no outside rate, threshold or date, so there is nothing to look up.