What is the average overhead percentage for a restoration company?

The RIA Cost of Doing Business Report reports average overhead of approximately 38% of revenue for insurance restoration contractors. This encompasses all non-job-direct costs: administrative and office labor, facilities, vehicles, equipment depreciation, marketing, insurance (GL, workers' comp), and technology. Overhead at 35–40% is considered normal; below 33% is efficient; above 43% is compressing net margins below sustainable levels.

What are the main categories of overhead for a restoration company?

The eight primary overhead categories for restoration companies: (1) administrative and office labor (8–12% of revenue), (2) owner compensation above field-level work (5–10%), (3) vehicles and transportation overhead (3–5%), (4) equipment depreciation and maintenance (3–6%), (5) facilities — office, warehouse, storage (2–5%), (6) insurance — GL, E&O, umbrella, workers' comp overhead (2–5%), (7) marketing and lead generation (2–5%), and (8) technology — QBO, Xactimate licenses, job management software (1–3%). TPA program fees are an additional category specific to program-enrolled contractors (5–15% of program revenue).

How does overhead percentage change as a restoration company grows?

Overhead percentage typically decreases as revenue grows, driven by fixed-cost leverage. Facilities, technology, and base administrative labor are largely fixed — spreading the same dollar overhead over more revenue reduces the percentage. A company with $1,140,000 in overhead at $3M revenue (38%) that grows to $5M revenue without proportional overhead growth runs at 22.8% overhead, transforming profitability. This fixed-cost leverage is the primary reason net margins improve meaningfully from $1M to $5M.

What overhead categories are most commonly too high at restoration companies?

Three categories most often run above healthy benchmarks: (1) administrative labor — office staff costs growing faster than revenue; (2) marketing spend — higher absolute dollars without proportional job volume; and (3) equipment depreciation from underutilized assets. TPA program fees are also frequently overlooked as overhead — they're often not coded as a named cost in the books, which understates overhead and overstates gross margin on program work.

Can a restoration company's overhead be below 30%?

Yes, and it's achievable. The most efficient restoration companies — typically lean single-location mitigation specialists with low marketing costs, fully-amortized equipment, and minimal administrative overhead — can operate at 28–33%. This requires discipline across all overhead categories: no underutilized assets, admin labor calibrated to revenue volume, and controlled marketing spend. Below 28% is rare and typically unsustainable as the company grows, because growth requires investment in overhead capacity.

What Overhead Percentage Is Healthy for a Restoration Company?

▸ Framework Answer

Industry median overhead for insurance restoration contractors: 38% of revenue. RIA Cost of Doing Business Report, 2024

That 38% isn't a single line — it's 8 categories, each with its own normal range and its own failure mode. Most companies running above 40% are over-indexed in 1–2 specific categories, not uniformly high across all eight.

The Number Behind the Number

When restoration owners hear "38% overhead," it lands as an abstract benchmark. The more useful question is: what's in that 38%, and which categories are you actually running above?

Most overhead problems in restoration companies aren't spread evenly. They concentrate in one or two places — usually admin labor growing faster than revenue, or equipment depreciation on assets that aren't generating corresponding revenue, or marketing spend that's running at 6% without clear attribution to job volume.

This post breaks the 38% into its components, gives healthy ranges for each, and shows how the mix changes across revenue tiers.

The 8 Overhead Categories

Image coming: Stacked bar chart showing the 8 overhead categories as a proportion of the 38% total overhead for a typical restoration company: administrative labor 10%, owner comp 7%, vehicles 4%, equipment depreciation 5%, facilities 3%, insurance 4%, marketing 4%, and technology 2% — totaling 38% of revenue

The overhead stack at the industry median. Each bar represents a typical allocation within the 38% total. Your mix will vary based on company structure and service lines.

| Overhead Category | Typical Range | Notes | |---|---|---| | Administrative / office labor | 8–12% | Office manager, bookkeeper, estimator admin, dispatcher | | Owner compensation (non-field) | 5–10% | CEO/operator comp above any direct field work | | Vehicles (overhead portion) | 3–5% | Depreciation, insurance, fuel not billed to jobs | | Equipment (depreciation + maintenance) | 3–6% | Non-billable asset costs | | Facilities (rent, utilities, storage) | 2–5% | Office, warehouse, equipment storage | | Insurance (GL, E&O, umbrella) | 2–5% | Liability and professional coverage | | Marketing and lead generation | 2–5% | Advertising, referral fees, networking costs | | Technology and software | 1–3% | QBO, Xactimate, job management, documentation tools | | Total (typical) | 26–51% | Median ~38% |

Source: RIA Cost of Doing Business Report 2024. RIA Cost of Doing Business Report, 2024 Owner compensation range reflects variability in how owners structure their pay; the 38% median assumes a market-rate salary for a CEO/operator.

The spread (26–51%) is real. A lean single-location mitigation specialist with low marketing costs and minimal administrative staff can run at 28–30%. A multi-location full-service contractor with heavy marketing spend and significant administrative infrastructure runs 44–48%. Both can be healthy — the absolute percentage matters less than whether each category is justified by the revenue it supports.

Healthy Ranges by Revenue Tier

Overhead percentage decreases as revenue grows because most overhead categories are partially or fully fixed. Benchmarks differ by tier: RIA Cost of Doing Business Report, 2024 IBISWorld, 2024

| Category | $1M Company | $3M Company | $5M Company | |---|---|---|---| | Administrative labor | 10–14% | 8–12% | 7–10% | | Owner comp (normalized) | 8–14% | 5–9% | 4–7% | | Vehicles | 4–6% | 3–5% | 3–4% | | Equipment depreciation | 4–7% | 3–6% | 3–5% | | Facilities | 3–6% | 2–5% | 2–4% | | Insurance | 3–6% | 2–5% | 2–4% | | Marketing | 3–6% | 2–5% | 2–5% | | Technology | 2–4% | 1–3% | 1–2% | | Total overhead | 37–63% | 26–50% | 24–41% | | Median target | ~40% | ~38% | ~35% |

The $1M company runs higher overhead percentages in almost every category because the fixed costs are spread over less revenue. This is normal — not a sign of inefficiency. The $5M company at 35% overhead is performing better in absolute terms, but the path from 40% to 35% is primarily revenue growth, not overhead cutting.

The Categories That Most Often Run High

Administrative labor above 12%: The most common overhead problem. When a company grows from $1.5M to $2.5M and adds office staff proportionally, admin labor can stay at 12–14% of revenue. But admin labor should not scale linearly with revenue — office staff should be able to support more volume without adding headcount at the same pace. If admin labor is above 12% at $3M+, the question is whether recent hires are justified by the marginal revenue they're supporting.

Marketing above 6%: Marketing spend is healthy at 3–5% for a company with established referral relationships and TPA programs. Above 6% should be generating measurable job volume. The diagnostic: revenue per marketing dollar. If marketing is at 6% but isn't attributable to specific job volume growth, it's supporting brand awareness — which may be valuable, but can't be evaluated without tracking.

Equipment depreciation above 8%: High equipment overhead typically means recent large equipment purchases, underutilized equipment, or both. Equipment that isn't generating billable days sits as overhead. The diagnostic: equipment utilization rate (billable days divided by available days). Well-managed restoration companies track this; most don't.

Owner comp structure as a distortion: If the owner takes a very low salary and classifies most compensation as distributions (which don't appear in operating overhead), overhead looks lower than it is. This isn't wrong, but it makes overhead benchmarking difficult. For the comparison to be meaningful, owner comp should be normalized to what it would cost to hire a replacement CEO/operator.

TPA Fees: The Often-Hidden Category

TPA program fees (Code Blue, Contractor Connection, Alacrity, Restoration 1, and others) are a unique overhead category for enrolled contractors. Fees typically run 5–15% of job revenue for program-routed work, paid by the contractor to the TPA program.

The accounting problem: Most restoration companies do not code TPA fees as a named overhead item in QBO. The fee is either deducted by the TPA before payment (it never appears in the books at all) or it's lumped into an undifferentiated "contract services" or "marketing" line.

The result: Gross margin on TPA work is overstated, overhead is understated, and the company has no visibility into the actual profitability of each TPA program. A job that looks like it's running at 50% gross margin is actually running at 38–43% gross margin if 10% of revenue is going to the TPA program before any overhead allocation. RIA Cost of Doing Business Report, 2024

The fix: Code TPA fees as a named overhead cost by program, matched against program revenue. This produces a TPA program P&L — which is the only way to make a data-driven decision about which programs to stay in, which to negotiate, and which to exit. See The Complete Guide to Insurance Billing Accounting for the full treatment.

How to Audit Your Own Overhead

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We'll pull your overhead percentage and break it into categories in 30 minutes. Most owners are surprised by at least one category — usually admin labor or TPA fees.

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The audit is a simple QBO exercise:

Step 1: Pull your P&L for the trailing 12 months on accrual basis.

Step 2: Identify all direct job costs and separate them from overhead. Direct costs = labor wages for field staff, materials purchased for jobs, subcontractor payments, equipment rental billed to specific jobs.

Step 3: Total all remaining expenses. This is your overhead. Divide by revenue = overhead percentage.

Step 4: Break the overhead into the 8 categories above. This requires line-item review — your chart of accounts may not be structured to match these categories, but a 30-minute review of the expense detail will produce a reasonable allocation.

Step 5: Compare each category to the benchmarks for your revenue tier.

What you're looking for: categories that are 2+ percentage points above the benchmark. A 2-point variance on $3M revenue is $60,000/year — worth understanding.

For the QBO chart of accounts structure that makes this analysis automatic, see QBO Class Tracking for Restoration. For how overhead interacts with the full profit waterfall from revenue to take-home, see Why Your $3M Restoration Company Might Only Be Making $80K.

Frequently Asked Questions

Is workers' compensation insurance considered overhead or a direct job cost?

Workers' compensation for field crews is a direct cost — it's directly tied to the labor on each job. Workers' comp for administrative and office staff is overhead. In practice, many restoration companies allocate all workers' comp as overhead because separating it by employee type requires additional payroll classification. The RIA CODB and most industry benchmarks treat field workers' comp as a direct cost; adjust your comparison accordingly.

How does vehicle utilization affect overhead?

Vehicles that are fully billable to jobs (technician vehicles, service trucks) can have their costs classified as direct costs or billed explicitly to jobs. Vehicles that primarily support overhead functions (owner's vehicle, office deliveries) are clearly overhead. The gray area is vehicles that do both. Most restoration companies run vehicles as overhead because job-level vehicle billing requires tracking that most operations don't maintain. This is an area where better tracking can meaningfully reduce overhead percentage.

What's the right overhead percentage for a fast-growing restoration company?

A fast-growing company should expect temporarily elevated overhead percentage because growth requires investment in capacity ahead of revenue. Adding an estimator, expanding the warehouse, or investing in a new equipment category increases overhead before the revenue from those investments arrives. A company growing 30%+ YoY at 42–44% overhead is not necessarily mismanaged — it may be appropriately investing in growth. The question is whether the overhead investment has a clear revenue payback.

Should I try to get below 35% overhead?

Below 35% is achievable and valuable — but not if it means under-investing in the capacity that drives growth. Admin labor below 8% of revenue may mean the operation is under-staffed and the owner is filling gaps. Marketing below 2% may mean the company is entirely dependent on TPA programs (high concentration risk) or legacy relationships. Optimizing overhead to the point where it constrains growth is a false economy.