Overhead

Definition

Overhead includes the behind-the-scenes costs of running a business, like rent, utilities, and office supplies, which aren’t directly tied to producing goods or services.

While overhead is part of operating expenses, they're not identical. Operating expenses include both overhead and direct costs related to production.

Why it matters

Overhead keeps the business’s wheels turning, even if it doesn’t directly make products or deliver services. But when overhead costs get out of control, they can chew into profits and put the business at a disadvantage. Smart overhead management lets a business keep prices in check, boost profit margins, and secure solid financial footing—helping build a stronger, more sustainable operation.