I have no overhead, I can bid low

I’ve heard it and have read it in print so many times. Such a wrong statement…and so foolish!

In the last 40 years or so in this profession, I’ve witnessed some wild statements regarding many aspects of business, including overhead. One of the most common and erroneous statements that I encounter is contractors stating that they can bid low because they don’t have any overhead.

The truth of the matter is that everyone who is in business has overhead. I don’t care if they work out of a shed in back of their house…they still have overhead. If they have a truck to get to work in, they need to pay for it. They need to pay for tires and gas and oil, etc…all overhead. Pencils, printer ink…overhead.

But you’ll see guys insist that they have little to no overhead every single day. They estimate jobs very primitively, figuring only for materials and direct labor…no markups to speak of and definitely no regard for that pencil or laptop that they bought from the big box store. And then they go on to contractor forums and boast that they can “bid cheap” and that they can “beat anybody’s price” because they have no overhead! Well that’s a story for another day but…

Truth is…

The sad truth is that most of these guys are really out of business, they just don’t know it yet. They consistently make less than what they need to in business until they just drop out of sight. Some of them don’t know how much overhead they have and others, well, they don’t even feel that they have overhead because they don’t have a brick and mortar office, paid office help, etc.

Smaller companies may have less overhead in dollar amounts but they usually have larger overheads in “percentage” amounts…meaning they have a heavier overhead burden per man than a larger company that can spread overhead over more workers.