Why Consulting Firms Owners Should Care
For consulting firms, overhead is every expense that doesn't directly generate client revenue. The biggest hidden overhead in consulting is non-billable time — proposals, admin, internal meetings. A senior consultant spending 30% of their time on non-billable work represents massive overhead on a $120K+ salary. Utilization rate is the inverse of overhead.
Industry Benchmarks
25-35% of revenue
Healthy Range
36-45% of revenue
Warning Zone
Over 45% of revenue
Danger Zone
Industry context: Solo consultants: 15-25%. Small firms (3-8 people): 25-35%. Larger firms (10+ people): 35-45%. Overhead scales with support staff and office space.
Source: Consulting firm financial benchmarks, 2025
How to Calculate Overhead Costs
Formula
Overhead Rate = (Total Overhead Costs / Total Revenue) × 100
In plain English
What percentage of every dollar you earn goes to keeping the business running (not counting direct service delivery costs)
Example: Keystone Consulting Group
Annual Revenue 6 consultants + 2 support staff | $1,500,000 |
Non-Billable Time 30% of consultant comp (proposals, admin, meetings) | -$216,000 |
Business Development Travel, conferences, pitch costs, networking | -$75,000 |
Office Lease + Coworking Office space and client meeting rooms | -$60,000 |
Admin Staff (2 People) Office manager and bookkeeper | -$110,000 |
Technology & Software CRM, project management, time tracking, comms | -$36,000 |
Insurance & Legal E&O, general liability, legal retainer | -$30,000 |
Professional Development Certifications, conferences, training | -$18,000 |
Miscellaneous Client entertainment, non-client travel | -$15,000 |
Calculation
($560,000 overhead / $1,500,000 revenue) × 100 = 37.3% overhead rate
This firm spends 37 cents of every dollar on overhead. Non-billable time is the largest single overhead item at $216K. Improving utilization from 70% to 80% would reduce that by $72K, pushing net margin from 17.7% to over 22%.
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Get My Free ScoreCommon Problems in Consulting Firms
Symptom
Tracking utilization rates but not translating to dollar cost
Impact
A $150K/year consultant at 65% utilization has $52,500 in salary going to overhead. Make that cost visible or it gets ignored.
How to Improve Your Overhead Costs
How to do it
Multiply each consultant's hourly cost by their non-billable hours per month. Report this as "Overhead: Non-Billable Time" alongside other overhead categories.
Expected impact
Makes the real cost visible. Most firms find 15-25% of total compensation is non-billable overhead. Seeing the number drives behavior change.
Key Takeaways
What it measures
The ongoing expenses of running your business that aren't tied to delivering a specific product or service
Healthy range for Consulting Firms
25-35% of revenue
Formula in plain English
What percentage of every dollar you earn goes to keeping the business running (not counting direct service delivery costs)
Most common problem
Non-billable time not tracked as overhead
Fastest fix
Track non-billable time in dollar terms
Related Financial Metrics
Other important metrics for Consulting Firms
Overhead Costs in Other Industries
See how overhead costs compares across different business types
Cleaning Companies
Cleaning company overhead runs 10-18% solo, 20-28% for small teams, and 25-35% for larger operations. See benchmarks by company size.
Salons & Spas
Salon overhead averages 25-38% of revenue. Booth rental runs 20-30%, employee model 30-45%, high-end hits 35-50%. See benchmarks by salon type.
Restaurants
Restaurant overhead averages 20-30% of revenue. Fast-casual runs 18-25%, full-service 25-35%, fine dining hits 30-40%. See benchmarks by format.
HVAC Contractors
HVAC overhead averages 25-35% for residential and 30-40% for commercial. Larger fleets trend higher. See the benchmarks and where to cut.