I have no overhead, so I can bid low

This statement—often repeated and written—is fundamentally flawed and deeply misguided.

Over the past four decades in this field, I’ve come across countless misconceptions about business practices, and one of the most persistent is the myth that some contractors believe they can outbid others simply because they claim to have no overhead.

Here’s the reality: every business, no matter how small, has overhead. It doesn’t matter if someone is running their operation out of a backyard shed or a corner of their garage—they still have expenses. A work truck? It needs fuel, maintenance, and insurance. Tools? They wear out or break and need to be replaced. Even a pack of printer paper or a tube of caulk is part of overhead.

Yet, there are contractors who ignore this reality entirely. Their estimating methods are oversimplified—covering only materials and direct labor, with no thought to markups or the hidden costs of running a business. They’ll boast online or at job sites about how they can “bid dirt cheap” or “undercut anyone” because they supposedly have no overhead.

The hard truth? Many of these folks are walking a tightrope over bankruptcy without realizing it. By neglecting to account for their overhead, they price their work so low that their businesses are unsustainable. They don’t last long, disappearing from the industry when the financial strain becomes too much.

Some of these contractors simply don’t understand what overhead entails. Others assume that because they lack a formal office or staff, they don’t have it. But overhead isn’t limited to an office lease or a payroll. It’s all the little, unglamorous costs that come with keeping a business running.

While smaller companies might have lower overall overhead costs in dollar terms, their overhead burden as a percentage of revenue is often much higher. They don’t have the ability to spread those costs across a larger workforce like bigger companies can. This makes it even more critical for small contractors to recognize and account for their overhead—because ignoring it doesn’t make it go away.