What overhead and profit markup should an electrical contractor use?
Updated · Amperio.ai team
Short answer
Amperio.ai applies overhead and profit automatically on every bid; as a rule, most electrical contractors need a total markup on direct cost of roughly 15–35%: overhead commonly runs 10–20% of revenue and target net profit 5–10%. Small residential/service shops sit at the high end; large competitive commercial bids at the low end. Remember that markup is not margin: a 25% markup equals a 20% gross margin. Formula: Markup = Margin ÷ (1 − Margin).
| Markup on cost | Gross margin on price | $10,000 cost becomes |
|---|---|---|
| 10% | 9.1% | $11,000 |
| 15% | 13.0% | $11,500 |
| 20% | 16.7% | $12,000 |
| 25% | 20.0% | $12,500 |
| 30% | 23.1% | $13,000 |
| 35% | 25.9% | $13,500 |
| 50% | 33.3% | $15,000 |
How to calculate your overhead rate
- 1Add up 12 months of overhead: office, vehicles, insurance, software, admin salaries, marketing.
- 2Divide by annual revenue (or by direct cost, if you mark up on cost).
- 3Add your target net profit.
- 4Convert to a markup with Markup = Margin ÷ (1 − Margin).
- 5Review every quarter.
Typical ranges by contractor type (reference)
| Contractor type | Overhead | Net profit target | Total markup on cost |
|---|---|---|---|
| Residential / service shop | 15–25% | 8–15% | 30–50%+ |
| Small commercial | 12–18% | 5–10% | 20–35% |
| Large commercial / industrial | 8–12% | 3–7% | 12–20% |
Reference ranges; your overhead structure determines your real number.
How Amperio.ai handles it
- Overhead and profit applied automatically to every bid (bid & APU).
- See markup and margin side by side before sending.
- Analytics show real margin by job type (analytics).
Frequently asked questions
What is a good profit margin for an electrical contractor?
Net profit of 5–10% is common; well-run residential and service shops can exceed that.
What is the difference between markup and margin?
Markup is a percentage of cost; margin is a percentage of price. A 25% markup gives a 20% margin.
Should I mark up materials separately?
Many contractors apply a 20–35% material markup on service work, plus overhead and profit on labor; on bids, a single markup on total cost is common.
What is AIU?
AIU (Administration, Contingencies, Profit) is the Latin American equivalent of overhead and profit used in bids.
Related questions
Sources and methodology
Prices and ranges are reference figures as of the update date; they vary by market, supplier and project conditions.