Why overhead matters to a first-time founder
Rent, insurance, software and administration still need funding even when they cannot be assigned neatly to one sale. Missing them from pricing makes profitable-looking work lose money, while understanding them helps a founder judge the sales volume needed to break even.
Examples of overhead
A design studio spends €6,000 monthly on office rent, accounting, shared software and management salaries. Those costs support every client rather than one project, so the studio must recover them across its billable work when setting prices.
Common misunderstanding
It is not every operating expense, and it is not always fixed. Electricity or shared support costs may vary with activity while remaining indirect. A cost can also be direct in one business but overhead in another, depending on traceability.
When to use it
Use it when budgeting, pricing jobs and reviewing efficiency. Classify costs consistently, then allocate overhead only where that improves a decision. Do not force an arbitrary allocation into product decisions when the shared cost will not actually change.