Overhead Costs: A Complete Guide for Landscaping Businesses

Overhead costs are the indirect yet essential expenses that keep a landscaping business running, covering everything from office rent and admin salaries to insurance, vehicle maintenance, and software tools. These overhead expenses don’t show up on job invoices but must be accounted for to maintain healthy profit margins. Knowing how to calculate overhead costs using the overhead cost formula (Total Overhead ÷ Billable Hours) helps landscapers price jobs accurately and sustainably. With industry benchmarks showing overhead often makes up 20%–35% of revenue, regularly reviewing and managing these costs is critical for long-term success.

Running a landscaping business is more than just cutting grass and installing hardscapes. Behind every beautiful lawn is a company managing trucks, equipment, insurance, office staff, and a lot more. These are known as overhead costs and understanding them is essential if you want to build a profitable business.

In this guide, we’ll break down what overhead expenses are, how to calculate overhead costs, and the overhead cost formula you can use to ensure your pricing is always profitable.

What Are Overhead Costs in a Landscaping Business?

Overhead costs are the ongoing expenses required to run your landscaping business that aren’t directly tied to a specific job or project.

Think of them as the “background costs” of doing business, essential but not billable.

Some examples include:

• Office rent and utilities
• Salaries of administrative staff
• Business insurance
• Equipment depreciation
• Software subscriptions
• Vehicle maintenance and fuel (for non-job-specific use)
• Marketing and advertising
• Licensing and certifications

While these overhead expenses may not show up on a specific client invoice, they play a huge role in determining whether you’re turning a profit or just breaking even.

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Why Overhead Expenses Matter More Than You Think

Many landscaping business owners focus solely on direct costs like materials, labor, subcontractors, when pricing jobs. But if you ignore overhead, you’ll end up underpricing your work and draining your profits without realizing it.

Let’s say your crews are doing $30,000 worth of work per month. If your monthly overhead costs are $10,000, that means a third of your revenue goes toward just keeping the lights on. If your job pricing doesn’t account for that, you’re effectively working for free.

Understanding and allocating overhead correctly is what separates struggling businesses from scalable, profitable ones.

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‍Related Article: How a Break Even Calculator Can Guide Your Landscaping Business

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What the Numbers Say: Overhead Cost Benchmarks in Landscaping

Understanding your overhead isn’t just about math, it’s also about benchmarking. How do your overhead expenses compare to the industry average?

Here are a few stats and benchmarks to keep in mind:

Average Overhead in Landscaping Businesses

• According to the National Association of Landscape Professionals (NALP), overhead costs typically make up 20% to 35% of a landscaping company’s revenue.
• For smaller businesses (under $1M revenue), this number can be even higher, closer to 40%, due to less operational efficiency and fewer economies of scale.

Where the Money Goes

A breakdown from LMN’s financial benchmark reports suggests:

• Labor (non-billable): 8%–12%
• Office Rent & Utilities: 3%–5%
• Insurance & Licensing: 2%–4%
• Vehicles & Equipment Overhead: 5%–10%
• Software, Admin Tools, Subscriptions: 1%–3%

These numbers vary depending on your company size, geography, and services offered but they give you a useful baseline to assess your own overhead profile.

Profit Impact of Underestimating Overhead

A 2023 Lawn & Landscape survey found that 52% of contractors said they missed profitability targets due to inaccurate overhead allocation in their estimates. That’s more than half of the industry working harder, but not smarter.

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Case Study: How EnergyScapes Added $1M+ in Revenue in Just 8.5 Months Using AI-Driven Estimating

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Types of Overhead Costs in Landscaping

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Not all overhead expenses are the same. Here’s how you can categorize them:

1. Fixed Overhead Costs

These costs stay the same regardless of how much work you do. Examples:

• Office lease
• Salaries for non-field staff
• Insurance premiums
• Loan repayments

2. Variable Overhead Costs

These fluctuate depending on your business activity. Examples:

• Fuel costs
• Utility bills
• Hourly support staff
• Equipment repairs

3. Semi-variable Overhead Costs

Some costs have both fixed and variable components. For instance:

• Phone plans (base rate + per-minute overage)
• Vehicle costs (lease + fuel)

By tracking your overhead cost types, you can better forecast your monthly expenses and adjust your operations accordingly.

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How to Calculate Overhead Costs for Your Landscaping Business

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If you're wondering how to calculate overhead costs for accurate pricing, here's a step-by-step breakdown:

Step 1: List All Overhead Expenses

Track everything you spend in a month that isn’t tied to a specific job. Be thorough as many small recurring charges add up over time.

Step 2: Calculate Monthly Overhead

Add up all those expenses to get your total monthly overhead cost. For example, if you have:

• Office rent: $2,000
• Admin salaries: $6,000
• Software tools: $500
• Fuel and maintenance: $1,000
• Insurance: $1,500

Your monthly overhead = $11,000

Step 3: Determine Your Billable Hours

Next, figure out how many billable hours your crews work each month. Let’s say:

• You have 4 field staff
• Each works 160 hours/month
• 75% of those hours are billable

Total billable hours = 4 x 160 x 0.75 = 480 hours

Step 4: Use the Overhead Cost Formula

Overhead Cost per Hour = Total Monthly Overhead ÷ Total Billable Hours

Using the numbers above:

$11,000 ÷ 480 = $22.91/hour

That means for every hour you estimate for a job, you need to add $22.91 just to cover your overhead expenses. Not including this in your bids means eating into your profits or worse, your personal pay.

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How to Factor Overhead into Your Job Pricing

Once you’ve calculated your hourly overhead rate, add it to your production rate. If your crew’s labor costs $35/hour and your overhead is $22.91/hour, your true hourly cost is nearly $58/hour.

Add your desired markup (say, 20%), and your selling rate becomes $70/hour.

This ensures every job contributes to covering overhead, not just direct costs.

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How to Reduce Overhead Costs Without Hurting Operations

Sometimes, overhead creeps up without you noticing. Here are some strategies to manage and reduce it smartly:

• Use AI tools and automation to reduce time spent on takeoffs, estimating, and customer communications (e.g., SiteRecon).
• Review software subscriptions annually- are you paying for tools your team rarely uses?
• Outsource non-core tasks like bookkeeping, marketing, or payroll.
• Switch to fuel-efficient vehicles or route optimization tools to lower fleet costs.
• Audit insurance policies and shop around for better rates.

Remember: The goal isn’t to cut corners, it’s to get leaner without sacrificing quality.

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Final Thoughts: Use Overhead to Price with Confidence

Overhead costs are unavoidable but manageable. The key is to treat them like any other part of your job costing system: visible, measurable, and built into every estimate.

Want to make estimating easier? Tools like SiteRecon Estimator help you price jobs more accurately by tying estimates directly to your maps, tasks, and production rates, so overhead never slips through the cracks.

Book a demo to see how SiteRecon can help you build more profitable bids with less guesswork.

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FAQs About Overhead Costs in Landscaping

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What are common overhead expenses in landscaping?

Common overhead expenses include rent, admin salaries, insurance, equipment depreciation, vehicle costs, and business software.

What’s the overhead cost formula?

Overhead Cost per Hour = Total Overhead ÷ Billable Hours

This formula helps you distribute your monthly overhead across all billable work.

How do you calculate overhead costs into a landscaping estimate?

Add the calculated hourly overhead rate to your labor rate and apply your profit markup. This ensures you’re covering both direct and indirect expenses.

Why are overhead costs important?

If you ignore overhead, you may underbid jobs and operate at a loss. Knowing your overhead ensures that your pricing supports the business and not just the project.