In insurance work, overhead and profit is a line an adjuster may add to an estimate. In your own pricing it is the money that covers your fixed costs and leaves something over. Ten and ten is a convention from insurance restoration work, not a rule. Your required overhead percentage is your overhead dollars divided by your revenue, and nobody else's figure can tell you what it is.
Written by JD Davenport, who still sells for a living. Updated 4 November 2026.
The phrase means two different things, and almost every argument about it is two people using different definitions without noticing.
Overhead is what the business costs to exist. It bills whether or not you sold a roof this month.
Rent, insurance, the truck payment, the phone, software, the office person, your own pay, fuel, licensing, advertising. It is not a percentage. It is a dollar figure you can add up, and most contractors have never added it up.
Profit is what is left after the job's own costs and after overhead. Not before.
Ten percent overhead and ten percent profit circulates as though it were a standard. It is a convention from a particular corner of insurance restoration work and it was never a statement about what any given business needs.
Your required overhead percentage is your overhead dollars divided by your revenue. If your fixed costs are high relative to your volume, ten percent does not cover them, and running at ten percent while believing it is the standard loses money quietly, every job, for as long as you do it.
Run the division. It takes ten minutes and it is the only version of this number that is about you.
On an insurance estimate, overhead and profit is a line item that may be added when a job is complex enough to require a general contractor to coordinate multiple trades. Whether it gets included is a matter of the carrier's position and the specifics of the loss, and it is argued constantly.
Two things worth keeping straight. Whether the adjuster allows that line has nothing to do with whether your business needs overhead recovery, because your overhead exists either way. And it is not a bonus. It is a contribution toward costs you were already carrying.
This is where real money gets lost, and the arithmetic is worth doing once in your life.
A job costs you $10,000. Mark it up 20 percent and you charge $12,000. Your gross profit is $2,000 on $12,000 of revenue, which is 16.7 percent margin, not 20.
To actually make 20 percent margin on a $10,000 cost you have to charge $12,500. That is a 25 percent markup.
Contractors who set a markup and talk about it as a margin are running several points thinner than they think they are, on every job, forever.
Add up your fixed costs for a year. Decide what you intend to pay yourself and what you want the business to keep. Divide the total by the revenue you can realistically produce. That ratio is what your pricing has to carry.
Then check whether your current pricing carries it, using what jobs actually cost rather than what you estimated. That second half is the part that surprises people.
The method for knowing what a job actually cost, which is what any of this depends on, is The Job Cost Standard. More answers on the questions page.