Most landscape contractors do not know their overhead percentage — and the ones who do often discover it is 10 points higher than it should be. Here are the real benchmarks.
Ask most landscape contractors what their overhead percentage is and they will give you one of two answers: a guess, or a blank stare. Neither helps them price correctly or understand why the business is not producing the profit it should.
Overhead percentage is the portion of every revenue dollar that goes toward running the business — before any profit and separate from the direct cost of producing the work. It is the number your pricing must always cover. When it is not covered, every job you complete moves you closer to insolvency, regardless of how busy you are.
How to Calculate Your Overhead Percentage
Overhead percentage = Total annual overhead costs divided by total annual revenue, expressed as a percentage.
Total annual overhead includes everything you spend to run the company that is NOT directly tied to producing a specific job: rent, insurance, owner salary, office staff, software, marketing, vehicle payments, equipment depreciation on shared assets, accounting fees, and loan interest.
Example: A landscape company with $850,000 in annual revenue spends $195,000 per year on overhead. Overhead percentage = $195,000 / $850,000 = 22.9%.
That company must price every job so that at least 22.9% of every revenue dollar goes to overhead. If they hit a 40% gross margin on jobs, they have 40 cents per revenue dollar for overhead and profit. 22.9 cents covers overhead, leaving 17.1 cents — a 17.1% net margin. That is a healthy business.
If they only achieve 28% gross margins — which is common when estimating is loose — that same overhead leaves only 5.1 cents per dollar in net profit. One bad quarter and they are in the red.
Overhead Benchmarks by Revenue Tier
Overhead percentage naturally decreases as revenue grows, because many overhead costs are fixed — they do not scale proportionally with revenue. Here are realistic target ranges by revenue tier for landscape construction companies:
- Under $400,000: 28–38% overhead — owner-operator, lean structure, but limited revenue to dilute fixed costs
- $400,000–$750,000: 22–30% overhead — first foreman hired, operational costs rising with growth
- $750,000–$1.5M: 18–26% overhead — established team, overhead diluted by higher volume
- $1.5M–$3M: 15–22% overhead — multiple crews, possible office staff, still room for efficiency
- Above $3M: 12–18% overhead — administrative leverage at scale, often with a dedicated operations manager
If your overhead is 5 to 10 points above the range for your revenue tier, that is a signal. Either your fixed costs are too high for current revenue, your revenue is below where it should be for your overhead structure, or you have miscategorized some costs as overhead when they should be direct job costs.
What Drives Overhead Too High
The most common causes of elevated overhead percentages in landscape companies:
Owner salary misclassification. Many owners do not pay themselves a market salary — they take distributions and classify those as profit. This makes overhead look low and profit look high. When the overhead calculation includes a real market salary for what the owner does, the overhead percentage typically rises 8 to 12 points. The business looks less profitable but is being measured accurately.
Fleet costs not tied to jobs. Trucks and trailers that are paid for through overhead but could be job-costed (charged per use per project) inflate the overhead rate. If you have 3 trucks, consider whether each truck should have a daily or weekly rate charged to jobs that use it. Moving vehicle costs from overhead to direct job costs gives you a truer picture of both.
Staffing ahead of revenue. Hiring administrative or operational roles before revenue justifies them is the most common cause of high overhead in growing companies. A $350,000 company that hired an office manager at $48,000 per year now has an overhead rate 13 points higher than a peer company at the same revenue. The hire may be strategically correct for growth — but the owner needs to price aggressively to grow into it fast.
"I thought my overhead was around 18%. When I actually added up everything — including my salary and the trucks — it was 31%. I had been underpricing every job by 13 points."
How to Reduce Overhead Without Cutting What Matters
Reducing overhead is not always about cutting costs — sometimes it is about growing revenue faster than overhead grows. A company that adds $200,000 in revenue while holding overhead flat drops its overhead percentage significantly without eliminating a single expense.
When cost reduction is needed, start with the largest line items: insurance, vehicle payments, and rent. Insurance premiums can often be reduced by shopping the market annually — even with the same coverage. Vehicle payments are fixed once signed, but future purchases can be structured differently (buy used, delay equipment investment, lease versus buy analysis). Rent is often the hardest to reduce mid-lease but can be renegotiated at renewal.
Software subscriptions accumulate invisibly. Audit every recurring subscription annually. A $50/month tool no one uses is $600 in overhead per year. Ten of those is $6,000 — over half a percentage point of overhead at $1M in revenue. Small, but it adds up.
For the full framework on calculating your overhead correctly, see the real overhead calculation guide. Once you know the number, you can build it into every bid with the profit-first pricing formula.
What Happens When You Price Without Knowing Your Overhead
You end up with a business that looks busy and feels productive — but does not make money. The jobs get done. Revenue comes in. And then at the end of the year, after you add up what actually went to overhead, there is almost nothing left.
The overhead percentage is the number that connects your pricing to your profitability. Without it, you are estimating in the dark. You might get lucky in a good year. You will not survive a bad one.
Calculate it. Update it annually. Build it into every bid. And track your actual gross margin per job to confirm that the overhead is being covered project by project — not just on average across the year. Use the free overhead calculator to get started today.
Built for Landscape Contractors
Stop guessing. Start knowing what every job costs.
Ledge tracks estimates, actuals, and margins in one place — so you know exactly where your money went before the next bid goes out.
Frequently Asked Questions
What is a good overhead percentage for a landscape company?
For most landscape construction companies in the $500K to $1.5M range, a target overhead of 18–26% of revenue is healthy. Below 18% often means the owner is not paying themselves a market salary (masking overhead). Above 30% means fixed costs are too high for current revenue, pricing is too low, or both. Benchmark your overhead against companies at your revenue level — not against the industry overall, which spans every size.
Is owner salary part of overhead?
Yes — and it should reflect what you would pay a replacement to do your job, not what you choose to take home. If you manage sales, estimating, and operations, a market replacement might cost $80,000–$100,000 per year. If that number is not in your overhead, you are working for free and calling it profit. The business looks healthy on paper. It is not.
Why does overhead percentage drop as revenue grows?
Most overhead costs are fixed or semi-fixed — they do not double when revenue doubles. Rent stays the same whether you do $800K or $1.1M in revenue. Insurance increases modestly. Your accounting fees do not change. As revenue grows, these fixed costs become a smaller percentage of total revenue. This is called operational leverage — and it is the main financial reason growing revenue is worth the investment.
Can I have different overhead percentages for different types of work?
Not easily — overhead is a company-wide cost, not a job-specific one. However, you can adjust your gross margin targets by job type to reflect the different administrative burden each type carries. Small jobs have disproportionately high overhead per dollar of revenue (more client communication, more admin, smaller production runs) — so they should carry higher gross margin targets to compensate. Large projects spread overhead more efficiently.
How do I know if my overhead is too high versus my revenue being too low?
Look at your fixed costs in dollar terms first. If your overhead is $220,000 and your revenue is $700,000, your overhead rate is 31%. If you grew revenue to $1,000,000 with the same $220,000 overhead, the rate drops to 22%. That suggests the overhead structure is actually fine — you just need more revenue to dilute it. If the $220,000 contains costs you could reduce (unused equipment, excess staff, unnecessary subscriptions), that is a cost problem worth addressing regardless of revenue.
Edgar Galindo
Co-founder, Ledge
Edgar built Ledge while running a landscape construction company in Central Texas. He writes about estimating, job costing, and building a business that runs without you on every site.