{
  "slug": "direct-vs-indirect-cost-ratio",
  "title": "Direct vs. Indirect Cost Ratio Calculator",
  "heading": "Direct vs. Indirect Cost Ratio Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/direct-vs-indirect-cost-ratio",
  "summary": "Check how much of your job cost is overhead versus installed work.",
  "description": "Direct costs are labor, material, and equipment that go directly into the constructed work; indirect costs are general conditions, supervision, and jobsite support that make the direct work possible but aren't themselves installed into the building. Tracking the ratio between them across a job or across your whole backlog tells you whether your overhead structure is proportionate to the volume of actual work being produced — a rising indirect-to-direct ratio over time, without a corresponding change in project type, usually signals supervision or GC staffing has crept ahead of what current job volume justifies. This calculator takes your direct and indirect cost totals for a job or portfolio and returns the ratio, the indirect cost as a percentage of total cost, and flags whether that percentage falls inside a normal commercial construction range so you can catch overhead creep before it erodes margin across your whole book of work.",
  "formula": "Indirect ratio = Indirect cost ÷ Direct cost. Indirect % of total = Indirect cost ÷ (Direct + Indirect) × 100.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=direct-vs-indirect-cost-ratio",
  "inputs": [
    {
      "id": "directCost",
      "label": "Direct cost (labor + material + equipment)",
      "kind": "number",
      "hint": null,
      "default": 2000000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "indirectCost",
      "label": "Indirect cost (GCs, supervision, overhead)",
      "kind": "number",
      "hint": null,
      "default": 220000,
      "unit": "$",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "pctOfTotal",
      "label": "Indirect cost as % of total cost",
      "format": "percent",
      "hint": null,
      "primary": true
    },
    {
      "id": "ratio",
      "label": "Indirect-to-direct ratio",
      "format": "decimal",
      "hint": null,
      "primary": false
    },
    {
      "id": "total",
      "label": "Total project cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "inNormalRange",
      "label": "1 = within typical 5-15% range, 0 = outside",
      "format": "number",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Direct cost (labor + material + equipment): 2000000 $",
      "Indirect cost (GCs, supervision, overhead): 220000 $"
    ],
    "outputs": [
      "Indirect cost as % of total cost: 9.91%",
      "Indirect-to-direct ratio: 0.11",
      "Total project cost: $2,220,000.00",
      "1 = within typical 5-15% range, 0 = outside: 1"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter direct cost (labor + material + equipment) ($).",
      "Enter indirect cost (gcs, supervision, overhead) ($).",
      "Read your indirect cost as % of total cost on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "directCost": 1200000,
        "indirectCost": 130000
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "directCost": 2000000,
        "indirectCost": 220000
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "directCost": 3200000,
        "indirectCost": 350000
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "What's a normal indirect cost percentage for commercial construction?",
      "a": "Most commercial general contractors run indirect costs (GCs plus home office overhead allocation) at 5-15% of total project cost, with the exact figure depending heavily on project size, duration, and complexity — larger, longer-duration, or more complex jobs often run toward the higher end due to more supervision and coordination burden per dollar of work."
    },
    {
      "q": "Why would this ratio be a better diagnostic than tracking GC cost alone?",
      "a": "Tracking indirect dollars alone doesn't tell you if overhead is proportionate to workload — a company might have the same GC dollar spend on a $5M job as a $3M job, and the raw dollar figure looks stable while the ratio reveals the overhead burden per dollar of installed work actually increased. The ratio normalizes for project size, making it comparable across a portfolio of different-sized jobs."
    },
    {
      "q": "What causes indirect cost ratio to creep up over time?",
      "a": "Common causes are supervision headcount growing faster than revenue (adding project engineers or assistant supers before volume justifies it), extended project durations from delays that stretch fixed monthly GC costs over more calendar time without more work getting done, and creeping home office overhead allocation. Track the ratio quarterly across your active job portfolio to catch the trend early rather than discovering it at year-end."
    },
    {
      "q": "Does this ratio apply the same way to a small remodeling company as a large GC?",
      "a": "The absolute ratio benchmark shifts for smaller companies and smaller jobs — fixed overhead costs (a truck, insurance, a part-time admin) don't scale down proportionally with smaller project size, so small residential and light commercial contractors often legitimately run indirect ratios of 15-25% without it signaling a problem, versus the 5-15% range typical for larger commercial work."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/overhead-and-profit-allocation",
    "https://www.revenuelab.fyi/toolbox/general-conditions-percentage",
    "https://www.revenuelab.fyi/toolbox/labor-burden-rate"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Direct vs. Indirect Cost Ratio Calculator (https://www.revenuelab.fyi/toolbox/direct-vs-indirect-cost-ratio)"
}