The Number That Sits Below Every Quote You Send
Most small to medium-sized businesses know their overheads in broad terms. Fewer know what those costs add up to per working day - and that number is the floor below which every job runs at a loss, whether you realise it or not. Here is how to find it and what to do with it.
Most small to medium-sized businesses can name their biggest costs: the rent, the payroll, the insurance, the software subscriptions. What fewer can say, without a spreadsheet and a few minutes of work, is what those costs add up to per working day. That number is the floor beneath every job you price - and not knowing it is one of the quieter ways a business can stay busy while steadily losing ground.
When you quote a job, two things need to be true for you to make money. The first is that direct costs are covered: the materials, the labor, the sub-contractor, the specific things you buy or deploy for that particular job. The second is that you recover a share of the costs that exist regardless of whether any job is running. The second part is the one that causes the problem.
What Overhead Actually Means in Practice
Overhead is what you spend to keep the business operational. It runs whether you are busy or not: premises costs, vehicle leases, insurance, software subscriptions, accounting fees, the salaries of anyone not directly delivering work, and a realistic share of your own time spent on sales, admin, and management. If you stopped trading tomorrow, these costs would still appear on your bank statement for weeks or months.
The distinction that matters for pricing is straightforward. Direct costs live inside specific jobs. Overhead sits across all of them, and every job that runs has to carry its share. A business that prices to cover direct costs and a profit margin but does not recover overhead is quietly funding its own operations on every contract it wins. That is not a rare situation. It is one of the most common reasons a business can run at full capacity and still find itself short of cash.
What counts as overhead
Rent, insurance, vehicle costs, software subscriptions, admin salaries, accountancy fees, and any time spent on activities not billed to a specific job. The test is simple - if you would pay it even in a week with no active jobs, it is overhead.
Calculating Your Daily Overhead Floor
The calculation takes about an hour the first time and less than twenty minutes on every review after that. Start with your annual overhead total: every fixed or recurring cost that does not live inside a specific job. Then divide by the number of days in the year you can realistically bill work against - not calendar days, but working days after holidays, training, sales activity, and any other time that pulls your team away from delivery.
A business with £120,000 in annual overhead, operating across 230 billable days, has a daily overhead floor of around £520. That means every working day, whether a job is running or not, the business needs to generate at least £520 before it makes anything from its work. A five-day job that does not recover £2,600 in overhead contribution is losing ground - even if every direct cost is fully covered and the margin on materials looks fine.
The percentage varies significantly by business type. Established UK SMBs typically aim to keep overheads below 35% of total revenue, though the range is wide. A digital consultancy with remote staff may operate below 20%. A business with physical premises, a vehicle fleet, and a meaningful admin function could sit considerably higher. UK construction firms typically see overheads running at 10-20% of direct project costs, depending on business size and structure. The specific percentage matters less than knowing your own figure and building it into every quote you send.
Three Things the Number Changes
Knowing your overhead floor does not just affect how you price new work. It changes three conversations that come up regularly in almost any service or trade business.
The discount conversation. When a customer asks you to reduce your price, the first question is whether the revised number still clears your overhead floor, before you even consider profit margin. Without knowing the floor, you are making that call by instinct. Most businesses that discount without a floor in mind are doing so in a range where they cannot tell the difference between giving away margin they can afford and cutting into the overhead contribution that covers fixed costs.
The small job decision. A short job that looks straightforward often carries a disproportionate overhead burden. The quoting time, the admin, the mobilization, the coordination before work starts - before the job begins, several hours of overhead-carrying time have already been spent. Understanding that even a small job needs to clear the daily floor before it generates any return is what separates businesses that price small work accurately from ones that treat it as a way to keep people occupied.
The fully booked problem. A business running at full capacity but with a significant share of its jobs priced below the overhead floor is not a healthy business - it is an expensive one. High utilization looks good operationally and can feel like success. But if the jobs filling the calendar are not each clearing their overhead contribution, busyness and profitability are pointing in opposite directions. Knowing the floor is what makes the difference visible before it becomes a problem.
Profit margin is not the same as overhead recovery
Adding a profit percentage to your direct costs does not cover overhead. Overhead needs to be calculated and recovered separately, before any profit is applied. Skipping this step means subsidizing your own business costs on every job - and the loss is invisible until it compounds.
Making the Number Work
The exercise costs nothing and needs no software to complete. List every cost that would appear on your accounts even in a week with no active jobs. Add it up. Divide by your realistic annual billing days. That is your floor figure per day.
Once you have it, the number changes how you read a quote. Before you discount, before you take on a short job that feels too small to worry about, before you decide on a minimum day rate for any type of work, you have a reference point that the rest of your pricing can anchor to. Job costing tracked against actuals as jobs close shows you how well individual jobs are recovering that contribution over time. A system like Zigaflow's jobs feature makes that tracking straightforward across multiple active jobs. But the baseline calculation that underpins all of it can be done this afternoon on a single sheet of paper.
Sources
- Overhead Cost: Meaning, Examples and How to CalculateHowden Insurance · accessed 2026-09-05
- What Are Overhead Costs? A Simple Guide for UK BusinessesDebitam · accessed 2026-09-05
- Contractor Overhead Calculations - How to Price Your True CostsRapidQS UK · accessed 2026-09-05
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