Project Overhead & Management
Understanding the costs of running a construction business. Overhead isn't waste—it's essential to professional service delivery.
What Is Project Overhead?
Overhead costs are the business expenses required to operate a construction company and deliver professional service. These include rent, insurance, management, planning, and profit. Typical overhead is 20-35% of labour cost, though this varies by company size and type.
Business Overhead Costs
Rent & Facilities
Office/workshop rent: £1,000-5,000+ per month
Utilities (electricity, water, heating): £200-800 per month
Facility maintenance: £300-1,000 per month
Parking/storage for vehicles & equipment: £200-1,000 per month
A 10-person construction company typically has £3,000-8,000/month in facility costs.
Insurance
Public liability insurance: £500-2,000 per year
Employers' liability insurance: £600-2,000 per year
Professional indemnity insurance: £800-3,000 per year
Vehicle insurance (multiple vehicles): £2,000-8,000 per year
Tools & equipment insurance: £500-2,000 per year
Total insurance: typically £1,500-3,000 per month for established company.
Administrative & Management
Office staff salaries: £2,000-6,000 per month (if employed)
Accountant/bookkeeper fees: £200-600 per month
Legal fees (contracts, disputes): £100-400 per month (average)
Business software subscriptions: £100-300 per month
Phone & internet: £50-150 per month
Office supplies: £100-300 per month
Small companies often subcontract these. Larger companies employ staff.
Vehicles & Transport
Vehicle lease/finance: £300-800 per vehicle per month
Fuel costs: £200-600 per vehicle per month
Maintenance & repairs: £100-400 per vehicle per month
Vehicle tax/MOT: £50-100 per vehicle per month
A company with 5 vehicles: £3,000-8,000/month in transport costs.
Marketing & Business Development
Website & SEO: £200-500 per month
Local advertising: £200-800 per month
Google Ads: £300-1,000 per month
Printed materials (business cards, flyers): £100-300 per month
Companies spend 5-10% of turnover on marketing/business development.
Training & Compliance
Staff training (health & safety, skills): £200-600 per year per employee
Health & safety compliance: £300-800 per year
Certifications/memberships: £200-500 per year
PPE (hard hats, vests, boots): £500-2,000 per year for team
Project-Specific Management Costs
Site Supervision & Coordination
Project manager/supervisor time: £50-150/hour
Daily site visits/coordination: Usually 2-4 hours per day on larger projects
Communication with client, trades, suppliers: 1-2 hours per day typical
A 5-day project with supervisor: 3 hours/day × £80/hour × 5 days = £1,200 in management time alone.
Non-Billable Time
Site quotes/consultations: 1-3 hours (often unpaid)
Tender/proposal preparation: 2-4 hours (often unpaid, won't be used)
Site setup/cleanup (management): 1-2 hours before/after work
Paperwork/documentation: 30 minutes per day typical
Travel time between sites: 30 minutes to 2 hours depending on location
For every billable hour, contractors often spend 0.5-1 hour on non-billable work.
Profit Margin
Is Profit Margin "Extra Charge"?
No. Profit margin (typically 15-20% for quality contractors) is essential for business viability. It covers:
- Business growth and investment in better equipment
- Cash flow—contractors have to buy materials before invoicing you
- Bad debts—some customers don't pay
- Slow periods when there's no billable work
- Paying staff holidays and sick leave
- Reinvestment in training and certification
Profit Tier Expectations
10-12% profit: Budget contractors, high-volume, lower service level
15-20% profit: Standard professional contractors, sustainable business model
20-30% profit: Premium/specialist contractors, high-end projects, comprehensive service
Over 30% profit: Either taking on excessive risk or potentially overpricing
Real Cost Breakdown
10-Person Construction Company - Monthly Costs
This overhead must be spread across billable hours. If company works 800 billable hours/month (10 people × 40 hours × 2 weeks), overhead is £26/hour minimum.
Why Overhead Varies
- Company size: Solo operator has lower overhead than 20-person firm
- Location: London office rent: £3,000-5,000. Northern city: £1,000-2,000
- Service level: Premium companies with better equipment/training spend more on overhead
- Specialisation: Specialist work (listed buildings, heritage) has higher overhead
- Business model: Companies with office staff have higher overhead than solo traders
Red Flags in Overhead Pricing
- Quote with no overhead/management mentioned: Unrealistic—overhead always exists
- Excessive overhead charges: Over 30% of labour cost is high (unless premium service)
- Vague "management fee": Should be itemised or as percentage clearly stated
- "No overhead" promise: Impossible. Either deliberately misleading or unsustainable pricing
Key Takeaways
- Overhead costs are real and substantial—£15,000-30,000+ per month for professional firms
- Professional service (reliable, insured, trained) requires overhead investment
- Profit margin 15-20% is normal and healthy for sustainable business
- Extremely cheap contractors are either taking unsustainable risk or cutting corners